Linköping University
Master Thesis
Limin Chen & Shuai Hao
LIU-IEI-FIL-A--12/01232--SE
Exploring Coopetition in Single Firm and Its
Contribution to Service Management
A case study in Red Star Macalline and IKEA China
Limin Chen
Shuai Hao
Spring semester 2012
Supervisor: Jörgen Ljung
Master of Science in Business Administration;
Strategy and Management in International Organizations
Department of Management and Engineering
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Linköping University
Master Thesis
II
Limin Chen & Shuai Hao
Linköping University
Master Thesis
Limin Chen & Shuai Hao
Abstract
Title: Exploring coopetition in single firm and its contribution to service management
Authors: Limin Chen &Shuai Hao
Supervisor: Jörgen Ljung
Background: In the contemporary economy, companies increasingly cooperate with
their competitors to create competitive advantages through knowledge creation and
absorption, broad resource pool, reduced risks and uncertainties, and better products
and services for consumers. This situation is termed as coopetition which refers to
firms simultaneously competing and cooperating with each other.
Aim: As a newly developed concept, coopetition has not been fully studied in many
perspectives. This research studies two furnishing retailers in China, Red Star
Macalline and IKEA China to explore more fresh knowledge about coopetition. We
put our main focus on a single firm level, investigating the premises of coopetition
strategy, the driving forces behind coopetition behaviors, as well as the contribution of
coopetition to service management regarding each firm.
Method: Our research design applies the comparative case study. More specifically,
we adopt qualitative and deductive approach. The entire research primarily bases on
secondary data, including literature and published information about two firms. The
main source of first-hand data is gathered by interviews and observation.
Findings: For firms which involved in competition dominant coopetition, the
premises display the co-existence of similar and complementary attribute while in
cooperation dominant coopetition, bargaining power of specific participants and
unique characteristics of firms are key premises.
Mutual dependence and power imbalance are two main driving forces behind
coopetitive behaviors. In the low-mutual-dependence condition, actors behave
competitively regardless their power imbalance. In the imbalanced dependence
situation, the actor who has both power disadvantage and dependence disadvantage
has more cooperative behaviors.
Coopetition can contribute to the service management arena. Competition dominant
coopetition enhances service quality in terms of products and service diversity, while
cooperation dominant coopetition facilitates the customer value co-creation.
Key words: coopetition, competition dominant coopetition, cooperation dominant
coopetition, premises, coopetitive behavior, service management, Red Star Macalline,
IKEA China.
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Linköping University
Master Thesis
Limin Chen & Shuai Hao
Acknowledgement
This Master thesis is a final project of the program-Strategy and Management in
International Organizations at Linköping University. During this two years‘ study, we
obtained deep knowledge on business administration in international context. Now it
is the time for us to show our gratitude to all who give us support and help during the
whole process of our study.
First of all, we would like to thank Linköping University which provides us all the
facilities and resources we need to study and develop our competence. Then special
thanks to all the teachers in Business Administration division, without their guidance
and support, we could not go that far in this academic field, not to mention to
complete the master dissertation. Furthermore, we really appreciate the days that we
spend together with SMIOs from all over the world.
In addition, we want to give our greatest thanks to our supervisor Jörgen Ljung who
was always available to answer our questions and provided us with a great support
during our meetings. Furthermore, we would like to thank all the participants of our
thesis seminar group for the precious discussions.
Finally, we express our deepest love to our families who always stand by our sides
and give us continuous support especially during the study period and life in Sweden.
Limin Chen and Shuai Hao
Linköping
May 30th, 2012
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Linköping University
Master Thesis
Limin Chen & Shuai Hao
Table of Content
1
2
3
Introduction .............................................................................................................................. 1
1.1
Background ................................................................................................................. 1
1.2
Research problem ...................................................................................................... 2
1.2.1
Research gap .................................................................................................. 2
1.2.2
Case context ................................................................................................... 3
1.3
Purpose statement ..................................................................................................... 4
1.4
Contribution ................................................................................................................. 6
1.5
Research Outline ........................................................................................................ 7
Frame of Reference ............................................................................................................... 9
2.1
Coopetition .................................................................................................................. 9
2.1.1
The concept of coopetition .......................................................................... 10
2.1.2
The previous concern of coopetition .......................................................... 11
2.2
Elements and determinants of coopetition ........................................................... 16
2.2.1
Competition and similarity ........................................................................... 16
2.2.2
Cooperation and complementarity ............................................................. 18
2.3
Coopetitive relationship ........................................................................................... 19
2.3.1
Horizontal Relationships .............................................................................. 20
2.3.2
Vertical Relationships................................................................................... 21
2.4
Coopetition as a strategy to shape the business game ...................................... 22
2.4.1
The propositions of coopetition strategy application ............................... 23
2.4.2
The motives and benefits of coopetition strategy .................................... 24
2.4.3
Coopetition and competitive advantage .................................................... 25
2.4.4
Coopetition and value creation ................................................................... 27
2.5
Coopetitors’ behaviors ............................................................................................. 30
2.5.1
Coopetition and competitive behavior ....................................................... 31
2.5.2
Coopetition and cooperative behavior ....................................................... 31
2.5.3
Resource dependence ................................................................................. 32
2.6
The critics of coopetition.......................................................................................... 34
2.7
Service management ............................................................................................... 35
2.7.1
Service dominant view ................................................................................. 35
2.7.2
Service management system ..................................................................... 37
2.8
Summary and hypotheses ...................................................................................... 41
Methodology .......................................................................................................................... 42
3.1
Overview of research design .................................................................................. 42
3.1.1
Case study research .................................................................................... 42
3.1.2
Choice of case company ............................................................................. 43
3.2
Research approach .................................................................................................. 43
3.2.1
Qualitative approach .................................................................................... 43
3.2.2
Deductive approach ..................................................................................... 44
3.3
Data collection .......................................................................................................... 45
3.3.1
Primary data .................................................................................................. 47
3.3.2
Secondary data ............................................................................................. 49
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Linköping University
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Limin Chen & Shuai Hao
3.4
Reliability and validity............................................................................................... 50
3.5
Limitation.................................................................................................................... 51
4 Empirical Data....................................................................................................................... 52
4.1
The furnishing industry in China ............................................................................. 52
4.2
Red Star Macalline ................................................................................................... 53
4.2.1
Competitive behaviors of Red Star Macalline .......................................... 55
4.2.2
Service management in Red Star Macalline ............................................ 56
4.3
IKEA in China ............................................................................................................ 58
4.3.1
Cooperative behaviors of IKEA China ....................................................... 59
4.3.2
Service management in IKEA China ......................................................... 60
4.4
A new phenomenon ................................................................................................. 62
5 Analysis .................................................................................................................................. 64
5.1
Premises of coopetition ........................................................................................... 64
5.1.1
Competition-dominated coopetition ........................................................... 64
5.1.2
Cooperation-dominated coopetition ........................................................... 66
5.2
Coopetition in two companies................................................................................. 68
5.2.1
Competition dominant coopetitive relationships in Red Star Macalline 68
5.2.2
Cooperation dominant coopetitive relationships in IKEA China ............ 71
5.3
Coopetition adds values for service management .............................................. 74
5.3.1
Service management system in Red Star Macalline .............................. 74
5.3.2
Service management in IKEA China ......................................................... 77
5.4
Discussion on coopetition possibility ..................................................................... 80
6 Conclusion and Discussion ................................................................................................. 83
6.1
Conclusion ................................................................................................................. 83
6.2
Limitation and future research ................................................................................ 84
6.2.1
Limitation........................................................................................................ 84
6.2.2
Future research............................................................................................. 85
Reference ...................................................................................................................................... 87
Appendix ........................................................................................................................................ 95
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Limin Chen & Shuai Hao
Figures and Tables
Figure 1: Combination of cooperation and competition ....................................................... 9
Figure 2: Books published on the topic of coopetition ....................................................... 10
Figure 3: The four coopetition models ............................................................................... 15
Figure 4: Coopetition models ............................................................................................. 15
Figure 5: Coopetitive relationships within and among firms .............................................. 21
Figure 6: Propositions of applying coopetition strategy..................................................... 24
Figure 7: All the players in value net.................................................................................. 28
Figure 8: The service management system ...................................................................... 40
Figure 9 Deductive and inductive approach ...................................................................... 45
Figure 10: interview schedule ............................................................................................ 48
Figure 11: 8 generations of Red Star Macalline stores appearance ................................. 53
Figure 12: Red Star Macalline’s creative shopping concepts ........................................... 54
Figure 13: Different style of chairs designed by Versace and Ralph Lauren .................... 56
Figure 14:A bulletin board shows excellent salesmen and vendors in Xiamen Red Star
Macalline ............................................................................................................................ 56
Figure 15: IKEA’s logo in China ......................................................................................... 59
Figure 16: IKEA’s mart is under construction near Red Star Macalline in Pudong,
Shanghai, 2010 .................................................................................................................. 62
Figure 17: Landlord - tenants coopetitive relationships..................................................... 68
Figure 18: People relax in IKEA’s cafeteria in Shanghai ................................................... 73
Figure 19: Driving forces behind coopetitive behaviors .................................................... 74
Figure 20: Service management system in Red Star Macalline ....................................... 75
Figure 21: Service management system in IKEA China ................................................... 78
Table 1: Chapter outline ....................................................................................................... 8
Table 2: Selected articles of coopetition ............................................................................ 14
Table 3: A review of different types of competitive advantage .......................................... 27
Table 4: Comparison between Red Star Macalline and IKEA China................................. 80
VII
Linköping University
Master Thesis
Limin Chen & Shuai Hao
1 Introduction
1.1 Background
In the contemporary economy, companies increasingly cooperate with their
competitors to create competitive advantages through knowledge creation and
absorption, broad resource pool, reduced risks and uncertainties, and better products
and services for consumers (Ganguli, 2007).In academic research as well as in
business practice this phenomenon has been named ―coopetition‖ which refers to
firms simultaneously competing and cooperating with each other (Brandenburger and
Nalebuff, 1996; Bengtsson and Kock, 2000). It is a new method of operating business
that stresses resource sharing instead of resource duplication (Ganguli, 2007).The
concept of coopetition is developed from Game Theory which encourages companies
to keep both competition and cooperation in mind to shape a win-win business game.
To better understand the meaning of coopetition in real business environment, it is
necessary to mention a few coopetition cases among those well-known companies in
recent years. In February 2009, Amazon.com introduced Kindle 2, an e-reading
device, to the market.
Apple, a major rival challenged Amazon.com by
releasing iPad in April 2010 as an e-reader with a similar function as Kindle 2. Soon
after the launch of iPad, Amazon.com and Apple started a coopetitive relationship
where Apple is distributing the e-book content of Amazon.com through the ‖Kindle
App‖ on the iPad platform (Kalpanik and Zheng, 2011).
In 2010, two dominating firms in telecommunication industry, T-Mobile and Orange,
established a 50-50 joint venture in UK, namely, Everything Everywhere (BBC News,
2009). After the merger, Everything Everywhere has become the largest
communications company in British market, providing mobile and fixed-broadband
communications services to nearly 30 million customers through Orange and
T-Mobile brands (Everything Everywhere, 2012). This joint venture stands for a
significant cooperation as the outcome of the two firms tying up together. However,
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Limin Chen & Shuai Hao
in the store of Everything Everywhere, the products and service are sold under
individual brands, to a large extent they remain the traditional competitors which offer
the similar products and service categories.
The above cases point out the same phenomenon which is the conventional
competitors or firms competing in some areas tie up together and start collaboration to
some extent. Meanwhile they do not stop competition. This situation is termed as
coopetition which was first conceptualized in 1980s referring to business situations or
strategies where rival companies combine to create a stronger product or industry
(Quint, 1997). However, it is not until 1990s that it has been constructed and framed.
Coopetition is a hybrid strategy which evokes the combination of cooperation and
competition. Companies cooperate to create a bigger market pie but compete when it
is the time to divide (Abdallah and Wadhwa, 2009).
1.2 Research problem
1.2.1Research gap
The exploration and exploitation of coopetition is initiated from a network level
analysis which has been focusing on a series of fundamental issues, such as defining
coopetition and how it was formed (Bengtsson and Kock, 2000), understanding its
concept (Ganguli, 2007), illustrating the benefits of coopetition (Bigliardi et al., 2011),
and the impacts of coopetition strategy (Osarenkhoe, 2010). Besides, Chen et al.
(2008) explore the success factors of coopetition strategy, such as management
leadership and development of trust. Morris et al (2007) assess the relationship
between coopetition and firm performance especially in small companies. Tsai (2002)
stresses the coopetition among multi-units within a single firm which stands for a
minor research field.
As a newly developed concept, coopetition has not been fully studied in many
perspectives. In line with the above mentioned research fields, the majority of
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Limin Chen & Shuai Hao
literatures focus on the concept definition, reasons and benefits of coopetition, the
alliance and network analysis wherein most of them base on the inter-organizational
level or relational analysis (Bengtsson and Kock, 1999; Bigliardi, et al 2011; Todeva
and Knoke, 2005). Since the concept was created in the context of inter-firm level, the
ongoing researches likely cluster in exploiting the coopetition between firms.
However, less focus has been paid to internal coopetition within a single firm,
according to Walley (2007).
Furthermore, the research output tends to be less fruitful in the following arenas:
typologies and coopetition models, coopetition and firm performance, issues of
applying coopetition strategy, to name a few (Walley, 2007). The aforementioned
research areas are waiting for the continuous effort. What is more, the research
context in most of case study previously concentrated on the manufacturing or
technical sector but with less awareness in service industry which becomes more
important among the whole industry. The contribution of coopetition to service
industry and service management rarely has been touched in the context.
1.2.2Case context
This paper contributes to extant knowledge of coopetition in service industry by
separately studying two furniture retailing giants in China, IKEA China and a Chinese
local furnishing retailer, Red Star Macalline. IKEA, the renowned global furnishing
retailer which designs and sells its self-owned brands, entered into Chinese market in
1998. It has greatly adapted itself to the Chinese context while still keeps its concept
―simplicity is beauty‖ and self-service business style in China. Unlike IKEA China,
Red Star Macalline handles bundled brands. It was founded in 1986 and is growing
with the increasing Chinese economy and people‘s consuming power. So far it has
developed its outlet from a furnishing market to a modern shopping center.
Previous scholars have paid much attention to IKEA China‘s low price strategy and
cultural adaptation. As for Red Star Macalline, scholars are interested in its marketing
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Limin Chen & Shuai Hao
strategy and competitive advantages. However, no one explores the coopetitive
relationships of each. Bengtsson and Kock (2000) argue that coopetitive relationship
is the most complex and advantageous relationship between competitors. The
complexity in question is constituted by two diametrically different logics of
interaction. Actors involved in coopetition are in a relationship that on the one hand,
consists of hostility due to conflicting interests and consists of friendliness due to
common interests on the other hand. In Red Star Macalline, multiple brands which
compete fiercely with each other are cooperating in some way under Red Star
Macalline‘s administration. IKEA China and its Chinese customers also have a
coopetitive relationship in which they claim for their optimal interests by competing
with their bargaining power while cooperate to co-create value to keep a long-term
relationship. Depending on the degree of cooperation and competition, we see two
types
of
coopetitive
relationships
in
these
two
companies,
namely
cooperation-dominated relationship and competition-dominated relationship. Their
coopetitive behaviors regarding two types of relationships also differ from each other.
1.3 Purpose statement
The purpose of this dissertation stands to deeper investigate the coopetition
knowledge, in accordance with internal firm analysis, to address some issues not
mentioned in the current literatures. Our main purpose is to deliver updated
knowledge of coopetition, particularly the coopetition strategy and coopetitive
behaviors which correlate to the single firm‘s business model.
Explicitly, the research provides four hypotheses regarding our research questions.
First, we explore the premises of application of coopetition strategy with the
consideration of different features and structure in different firms. Then we examine
the determinants of coopetitive behaviors in order to resolve the issue why the firms
exhibit distinct behaviors. At last, this thesis intends to make a connection between
coopetition and service management to figure out how coopetition strategy affects the
business in service industry.
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Limin Chen & Shuai Hao
Overall, it is aimed to deliver the progressed understanding of coopetition within a
single firm. In details, we attempt to approach those underestimated subjects by
investigating
the following three research questions:
1. What are the premises for a single firm to apply coopetition strategy?
The application of coopetition strategy presents as an important as well as an
enormous research area. However, within that scope, the premises are the
fundamentally determinants for firms to choose which type of coopetition
strategy. Due to the individual features of different firms, the premises are rather
diversified. Thus this research question is put up in order to investigate the
appropriate premises of different types of coopetition.
2. In the coopetition context, how does resource dependence affect actors’
coopetitive and cooperative behaviors?
According to Casciaro and Piskorski (2005), resource dependence contains two main
dimensions, power imbalance and mutual dependence, which would affect the degree
of a firm‘s dependence on external resources. It provides an approach to explain firms‘
actions. We use this theory to study the driving forces behind the complex coopetitive
behaviors.
3. How does coopetition contribute to service industry in respect to service
management?
Service industry has rarely been involved in the coopetition studies. However, it has
emerged to be the most dominating industry scope. Coopetition, due to its particular
dual dimensions, may have certain contributions to the actors involved in their
network. Thus we wonder how coopetition impacts on service management and leads
some merits to service industry eventually. Addressing this research question also
depends on which type of coopetition strategy in use.
The questions mentioned above can be addressed through, firstly, sorting the existing
literature to outline a fundamental knowledge base. Then the consistent effort and
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Master Thesis
Limin Chen & Shuai Hao
emphasis will be put on research design, collecting empirical data, examining the
hypotheses in the case study (Red Star Macalline and IKEA China as pointed out
earlier). Afterward, the conclusion with our main finding incorporated is given at the
end of the thesis accompanied with the suggested future research arena.
The thesis compares with current theory and practical phenomenon, hence, to create
new knowledge setting for investigating coopetition strategy. We examine previous
research output in our specific but influential case context in order to deliver fresh and
applicable findings to similar situations.
1.4 Contribution
This research design values a lot in comparative case analysis by which we attempt to
deliver some new perspectives of considering coopetition for firms. With a
well-integrated theoretical input and empirical information, the research result offers a
few implications in both theoretical and practical aspects. On the one hand, the
theoretical finding provides more concrete argument on driving forces of coopetitive
behaviors and on the premises which largely affect the application of coopetition
strategy. Further, as a ―strategy‖, coopetition provides new interpretation and
contributions to service management.
On the other hand, it provides useful and applicable tips on implementing coopetition
from the practical perspective. The case companies-the furniture retailers we choose,
could exemplify for other players in retail industry. The analysis process and outcome
can be replicated into other segment of service industry. Though the context of the
chosen case is in China, the research result also could be fitted in other nations.
Additionally, referring to service industry, it seems urgent for firms to identify which
types of coopetition is more appropriate and to create competitive advantage in
attempt to address the fierce competition.
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Linköping University
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Limin Chen & Shuai Hao
1.5 Research Outline
In this chapter, the content covers the research problem and background. We state
why we are interested in studying ―coopetition‖. The research problem is constituted
by research gap and three specific, and interactively related research question which
have been portrayed in purpose statement. Furthermore, structure of the whole thesis
will be introduced in terms of research outline.
The main body is structured as following. Chapter 2 is a literature review, building the
frame of reference. In this section, the previous study of ―coopetition‖, and its relation
with other theories are discussed. We start our discussion by explaining the concept of
coopetition. The comparison of different research questions and findings regarding
coopetition as well as Game Theory are reviewed to help understand the hybrid
concept. Then we go deeper to discuss some related theories such as coopetitive
relationships, coopetitive behaviors, and determinants of coopetition, service
management, service dominant view and value creation analysis to support our later
analysis. An overview of these issues will provide guidance for discussions about the
motivation and influence of coopetition strategy for Red Star Macalline and IKEA
China.
Chapter 3 presents the methodology of this study. The qualitative and deductive
research was applied. Primary data were gathered by telephone and email contact with
two companies‘ specialists and managers, as well as observation conducted by our
friends and families. Secondary data were collected from press, company website and
document. In addition, the limitations of this study are also included in chapter 3.
The findings of the qualitative research are presented in chapter 4. More detailed
information regarding Red Star Macalline and IKEA China are illustrated. Chapter 5
analyzes the empirical data, guided by related theories and concepts. Three research
questions are discussed and answered in this section. The conclusion part in chapter 6
reassesses our purpose of this study and highlights our findings. We also suggest a
few direction for future research i.e. how to manage coopetition strategy and apply
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Limin Chen & Shuai Hao
coopetition strategy to other industries. The following table gives a brief view of our
chapter outline (see table 1).
Chapter Outline
Chapter 1
In this chapter we introduce the coopetition topic and its background,
and discuss the research problem and purpose of the thesis.
Chapter 2
The literature chapter states the relevant theory on coopetition as well
as service management which gives a clear framework of the concept.
Chapter 3
The methodology session explains how we design the research and
collect the data, as well as the research limitation.
Chapter 4
In this chapter, we describe coopetitive behavior and service
management system in Red Star Macalline and IKEA China.
Chapter 5
Analysis and discussion chapter is used to compare the theory and
empirical part in order to address our research question.
Chapter 6
The conclusion part highlights the finding and states the limitation of
our paper and future research.
Table 1: Chapter outline
Source: Authors’ own creation
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Limin Chen & Shuai Hao
2 Frame of Reference
2.1 Coopetition
The dynamic business environment has led many companies from a position where they
simply competed against each other, to a situation where they had to cooperate, and
now to a point where they have to both cooperate and compete to survive.
(Walley, 2007)
Coopetition builds on the idea that firms cooperate to create value and create a bigger
pie, and when the time comes to divide the pie they compete to appropriate value
(Abdallah and Wadhwa, 2009). It is clear from their point of view that coopetition is a
hybrid strategy which combines cooperation and competition (See figure 1). Thus two
or more organizations cooperate to compete. Nowadays, more and more companies are
involved in cooperation activities while simultaneously compete with their
competitors.
Figure 1: Combination of cooperation and competition
Source: Authors’ own creation
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Limin Chen & Shuai Hao
Coopetition is not a fully fresh idea introduced; however, highly clustered in recent
years, the chart below shows the development of published books on coopetition during
decades.
Figure 2: Books published on the topic of coopetition
Source: Google books Ngram Viewer, 2010.
2.1.1The concept of coopetition
The concept of coopetition which encompasses competition and cooperation is
developed from Game Theory. According to Grant (2010), all business relationships
combine elements of competition and cooperation, without simple dichotomy between
them. Game Theory helps companies to predict the possible consequences of strategic
moves by their competitors and themselves.
―Coopetition‖ was first introduced in the early 1980s, which refers to business
situations or strategies where rival companies combine to create a stronger product or
industry (Quint, 1997). However, this concept did not get much attention since scholars
at that time developed their researches on two opposite perspectives, i.e. cooperative
perspective and competitive perspective. The competitive perspective advocates that
companies should develop their unique resources and capabilities to achieve
competitive advantages, while the cooperative perspective advocates that companies
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Limin Chen & Shuai Hao
can improve their performance by sharing complementary resources (Abdallah and
Wadhwa, 2009). It is not until the latest ten years that ―coopetition‖ has been paid more
and more attention by scholars and managers.
The reason behind coopetition is that companies try to pursue a way to gain a
competitive and cooperative advantage (Quint, 1997). In line with this argument,
Brandenburger and Nalefuff (1996) claim that coopetition goes beyond the traditional
boundaries of competition and cooperation, in order to achieve the advantages of both.
2.1.2 The previous concern of coopetition
Though the topic is concentrated on coopetition, the focused perspectives are rather
diversified, including coopetition strategy, coopetition and firm performance and
network analysis. We select some articles with the main research effort and sort them
into the following table (Table2). Thus, based on this sorting, it not only illustrates
previous research problems, but also provides readers a comparison of different
approaches and focuses.
Author
Research
question
Bengtsson&Kock
(2000)
How
can
simultaneous
competition
and
cooperation
in
a
relationship
be divided,
and how can
advantages
of
coopetition
be
further
examined?
Gnyawali, et al.
How
Primary
organizationa
l focus
Network
Industry
Findings
Lining, Brewery
and Dairy
In a coopetitive
situation firms tend
to cooperate more
frequently
in
activities carried
out at a greater
distance from the
buyers.
Network
Steel
In
11
a
coopetitive
Linköping University
Master Thesis
Limin Chen & Shuai Hao
(2006)
coopetition
affects firms‘
competitive
behavior?
Ganguli (2007)
To
understand
coopetition
concept
in
different
types
of
businesses.
Network
Telecommunicatio
n
Coopetition
challenges the old
competition-centri
c viewpoint. 6
coopetitive models
were identified.
To exam the
benefit
of
coopetition
model.
Network
Space and defense
Coopetition helps
firms develop and
expand
their
business.
Dagnino&Padula
(2002)
How
coopetition
strategy
is
able
to
guarantee
value
creation?
Network
Automobile
Coopetition give
rise to knowledge
and
economic
value in macro,
meso and micro
levels.
Zineldin (2004)
How
to
develop and
survive
a
coopetitive
relationship?
Network
Cross-industry
Coopetition
can
deliver synergy if
carefully planned,
managed
and
controlled.
Osarenkhoe(2010)
What‘s the
impact
of
coopetition
on collective
strategies for
value
generation?
Network
Food, information,
wood processing
Coopetitive
relationship fosters
collective
intelligence
through
information
and
knowledge
sharing.
Walley (2007)
What can be
future
researched in
the subject of
coopetition?
Network, firm
Bigliardi,
(2011)
et
al.
network, firms that
are highly central
and
structurally
autonomous tend
to
be
more
competitively
active.
12
Presents an agenda
for
researchers
with eight topics.
Linköping University
Master Thesis
What‘s the
formation of
coopetition?
Mariani (2007)
Network
Limin Chen & Shuai Hao
Construction
Explore
emergent
dimension
coopetition,
introduce
concepts
imposed
cooperation
induced
coopetition.
the
of
and
two
of
and
Abdallah&Wadhw
a (2009)
How firms
improve their
performance
by
being
engaged in
coopetitive
networks
with
their
rivals?
Network
Morris,
(2007)
Assess
the
relationship
between
coopetition
and
small
firms‘
performance.
Network
Cross-industry
For small firms,
partnerships with
competitors
are
indeed predicated
on mutual benefit,
trust,
and
commitment.
Ritala(2011)
Examine the
effect of a
coopetition
strategy on
the
firm‘s
innovation
and market
performance
Network
Cross-industry
Coopetition
strategy
is
beneficial
under
high
market
uncertainty, high
network
externalities and
low
competition
intensity.
Tsai (2002)
How can a
multiunit
organization
coordinate its
units
and
encourage
them to share
knowledge
Firm
Cross-industry
Both formal and
informal
coordination
mechanisms
influence
intrafirmknowledg
e sharing.
et
al.
13
Define coopetitive
performance and
identify
three
sources
of
coopetitive
performance:
network resources,
absorptive capacity
and
relationship
governance.
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Limin Chen & Shuai Hao
with
their
competitors
inside
the
organization?
Chin, et al. (2008)
What are the
success
factors
to
coopetition
strategy
management
?
Network
Manufacturing
Management
leadership
and
development
of
trust are the most
important success
factors.
Table 2: Selected articles of coopetition
Source: Authors’ own creation
The formation of coopetition: emergent or intended?
It remains an argumentative issue whether the coopetition is unconsciously emerging
through the developing process of firms or as a strategy that firms intend to implement.
Most of the extant studies have emphasized the intentional character of coopetitive
strategies. Bengtsson and Kock (2000) argue that the driving force behind coopetition
is the heterogeneity of resources, as sometimes it is best to combine a company‘s
unique resources with other competitors‘. On the contrary, Mariani (2007) finds that
coopetition strategy is a process guided by external forces. In other words, environment
plays a crucial role in shaping coopetitive strategies.
Types of coopetition models
Regard to the degree of competition and cooperation, Luo (2004) identifies four types
of coopetition models, namely contender, adapter, monoplayer and partner (figure 3).
Coopetition strategy is more and more crucial for companies as the technology and
business environment change faster, hence the market becomes more uncertain.
Concerning the level of commitment to market creation and technology developments,
Chirgui (2005) also distinguishes four kinds of coopetition models, that is standard
setting, business integration, knowledge exchange, cooperative R&D (figure 4).
Companies need to adopt proper coopetition models by considering both external and
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internal environment.
High competition
Contender
Adapter
Low cooperation
High cooperation
Monoplayer
Partner
Figure 3: The four coopetition models
Low competition
Level of Commitment
on Market Creation
Source: Luo (2004).
High
Standard
Setting
Business
Integration
Low
Knowledge
Exchange
Cooperative
R&D
Low
High
Level of Commitment
on Technology Development
Figure 4: Coopetition models
Source: Chirgui (2005)
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Coopetition and knowledge sharing
On the inter-organizational level, Osarenkhoe (2010) argues that coopetition fosters
collective intelligence through information sharing. On the intra-organizational level,
Tsai (2002) studies the social structure which contributes to knowledge sharing. Based
on a big multiunit organization, he illustrates that informal lateral relations among
different units enables them to cooperate to share knowledge while compete with each
other for market share.
Coopetition affect performance
One of the reasons that companies coopete with each other is that they collaborate in the
quest for improved performance. Zineldin (2004) as well as Morris et al. (2007)
demonstrate that coopetition strategy improves companies‘ performance if it is
carefully planned, managed and controlled. In line with this argument, Ritala (2011)
examines the effect of coopetition strategy on companies‘ innovation and market
performance, arguing that coopetition strategy is beneficial under high market
uncertainty, high network externalities and low competition intensity. Abdallah and
Wadhwa (2009) propose a framework which defined companies‘ coopetitive
performance and identified three potential sources of coopetitive performance: network
resources, absorptive capacity and relationship governance.
Coopetition strategy is a hybrid strategy combining two paradoxical logics, which
makes it more difficult to handle. Scholars have also identified several success factors
for coopetition in practice. It is emphasized that development trust and managerial
leadership are the most important success factors (Chin et al., 2008; Osarenkhoe,
2010).
2.2 Elements and determinants of coopetition
2.2.1Competition and similarity
The definition of competition is referred to a dynamic situation where several
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participants in a specific market or segment are struggling for scarce resources, market,
and the homogenous products (or services) in attempt to meet same customer demand
(Hunt, 2007; Bengtsson and Kock, 2000). The driving forces for firms competing with
each other are largely based on the scare resource and market position. However, in
accordance with the research by Kildull et al (2010), the similarity between competitors
has a positive impact on rivalry which also fundamentally leads to substitute.
From the perspective of psychology, people are easily to be threatened by their close
people‘s success on self-relevant dimensions (Tesser, 1988; Menon et al, 2006). It is
argued that competitors, either similar in location or features might show the similar
―value identities or identities they strive for‖ (Menon et al., 2006, p.947). Britt (2005)
also suggests that individual level of motivation and stress rise when a task is largely
related to their valued identities. Hence the similarity between rivals in social society,
with respect to characteristics and location could foster acute competition. Regarding
economically rational reasons, as mentioned above, competitors who are in the same
industry often compete for same scarce resource, and pose greater pressures to one
another (Chen et al., 2007).
Similarity can be interpreted by both the same resource or assets (Menon et al., 2006)
and the proximity in location (the latter one is normally named as ―cluster‖). Proximity
in respect to geography, culture, and institution enable the creation of special access,
relationships, and upgraded knowledge, facilitate the smooth communication among
business parties, and build up other advantages on growth and productivity which
rarely can be achieved from a distance operation (Porter, 2000). The aforementioned
issues or advantages are likely to be found in a cluster that refers to a geographically
concentrated entity. Delgado et al., (2010) express that clusters enables the improved
productivity and efficiency so that companies involved can compete internally,
nationally and globally.
Porter (2000, p.16) points out that ―with globalization, new influences of clusters on
competition have taken on growing importance in an increasingly complex,
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knowledge-based, and dynamic economy‖. The multi-face communication and
knowledge sharing within a cluster enable participants to rethink competitiveness and
shift the conventional mind-sets of being granted (Porter, 2000). With respect to the
connection between cluster and coopetition, it can be illustrated by a case. For instance,
the fashion street with many stores, normally group together and depend on each other.
Those stores selling similar products compete for attracting consumers, but at the same
time, cooperate with others to create an advanced shopping environment and minimize
the operating cost.
2.2.2Cooperation and complementarity
Cooperative relationship is emerging through the situations involving competitor
interaction (Ang, 2008).Cooperation means a relationship where interactions among
individuals and organization take place through the sharing of complementary
resources and capabilities or leveraging these with the considerations of mutual benefit
(Gnyawali, et al., 2006; Blomqvist, et al., 2005). The main motive for firms to
cooperate tends to be adopting collective strategies in order to achieve value
creation. (Wang and Krakover, 2008)
A player can be viewed as a firm‘s complementor when customers value the product
portfolio more than when they have previous product alone (Nalebuff, 1996). The
cooperative relationships between complementors largely contribute to the added value.
Thus complementor network is very crucial regarding the concept of coopetition. When
companies consider cooperating with previous rivals, complementing character plays
an important role as it offers the opportunities for firms to create new values.
The theory of complementarity initiates from the complementary product and its
economic value mentioned in the value network which is also portrayed as the sixth
element in addition to Porter‘s five industry forces (Brandenburger and Nalebuff, 1996).
Adegbesan (2009) states that the value of ―complementarity‖ can be displayed when a
combination of different resources contributes to the creation of a ―surplus‖ beyond the
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overall amounts of value they could create independently. ―Firms with a greater degree
of complementarity to a target resource are able to create a larger surplus in
combination with that resource than firms with a lower degree of complementarity to
the resource.‖(Adegbesan, 2009, p.463)
In accordance with RBV, the performances of different firms vary because of different
resource endowments which cover assets, processes and knowledge possessed and
allocated by individual firm efficiently (Barney, 1991). Complementary resources, for
instance, the technology know-how from the company side and the market know-how
from the customers, lead to advanced capabilities and performance in comparison to
applying one resource alone or independently (Milgrom and Roberts, 1995; Moorman
and Slotegraaf, 1999).
2.3 Coopetitive relationship
In today’s business environment, companies are acting in a business network where
they compete and cooperate at the same time. The ambiguous interaction among
companies makes it difficult to define a competitor or a cooperator. Thus the pure
cooperative or competitive relationships can no longer describe companies mixed
relation.
(Bengtsson et al., ?)
The hybrid coopetition strategy leads to complex coopetitive relationships. The
coopetitive relationship is defined by Zineldin (2004) as an ongoing relationship
between different actors in networks which cooperate and compete simultaneously with
each other. They are able and willing to cooperate and compete on a basis of mutual
commitment and trust, and a mutual sharing of information, risks and rewards.
Bengtsson and Kock (1999, 2000) stress that coopetitive relationships in business
network is the most complex relationship, as there is a paradoxical logic behind it. On
the one hand, the idea behind cooperation is to involve in collective activities to achieve
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common goals. The idea behind competition on the other hand, is to compete with each
other to achieve self-interest.
Previous studies concern two types of relationships within networks, vertical
relationships between buyers and sellers, and horizontal relationships between
competing companies. The vertically linked actors are usually emphasized
cooperation; hence a cooperative coopetition is dominated. However, the horizontally
linked actors are usually related to competition, hence it is dominated by a
competitive coopetition (Steinby, 2002).
2.3.1Horizontal Relationships
According to Steinby (2002), the horizontal relationship is among competitors. As the
rivalry nature of it, actors who involved in a horizontal relationship try to avoid
interaction. Their relationships are often informal and intangible, as the exchanges
among them are mostly information and social exchanges.
Coopetitive relationships can be seen among different organizations. For example, the
retailer Tesco has developed a coopetitive relationship with Royal Bank of
Scotland(Walley, 2007). Dell and Compaq simultaneously compete in hardware
development and cooperate with software producers such as Microsoft (Zineldin 2004).
It is labeled as ―inter-organizational coopetition‖ by Osarenkhoe (2010). Through
coopetitive relationships, companies can gain benefit derived from market power,
shared experience, access to technologies, reduced threat from others competitors, etc.
Coopetitive relationships also exist among different units within the same organization,
which is known as ―intra-organizational coopetition‖ (Tsai, 2002). As they have
different interests but aiming at a same organizational goal, many units are forced to
both compete and cooperate with each other. Tsai (2002) argues that organizational
units cooperate to gain new knowledge and to exploit economies of scope for their
business operations. Simultaneously, they compete to get access to rare resources and
to achieve high rates of return. Figure 5 shows the relationships of the two relationships
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discussed above.
A
B
A
C
Units
Firms
Inter-firm
coopetitive
Intra-firm coopetitive
relationships
relationships
Figure 5: Coopetitive relationships within and among firms
Source: Authors’ own creation
However, in our case, the relationship between different brands in Red Star Macalline‘s
shopping mall and Red Star Macalline are more complicated. We name it
landlord-tenants relationship. We discuss more about it in Chapter 4.
2.3.2 Vertical Relationships
Vertical relationships exist e.g. among supplier-buyer relationships. They often build
on a mutual interest to interact and try to maintain interaction, as the improved
cooperation will contribute to the effectiveness in supply chain (Steinby, 2002).
Both cooperation and competition are needed in vertical relationships (Bengtsson and
Kock, 2000). For one thing, actors compete in some extent to capture benefit for
oneself as much as possible. For example, buyers ask for higher quality products while
sellers bargain for higher prices. For another, there is a need for cooperation, as the
actors must make adaptations to keep stable relationships. The relationship between
customers and IKEA in our case is one of the examples of vertical coopetitive
relationships.
Regardless of whether it is horizontal or vertical relationships, Bengtsson and Kock
(2000) point out three different types of coopetitive relationships among actors
depending
on
the
degree
of
cooperation
21
and
competition,
namely
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cooperation-dominated relationship, equal relationship and coopetition-dominated
relationship. Based on unique resource endowment theory, Castaldo et al (2010) also
identify two kinds of coopetitive relationships. They argue that a high resource
similarity will lead to a more competitive relationship, while a low resource similarity
will lead to a more cooperative relationship. Because of the nature of these two relation
types are different, the aspects of coopetition must be analyzed with different
approaches (Steinby, 2002). In a coopetitive relationship, actors are facing a strategic
dilemma, that is, to what extent they should compete with competitors and to what
extent should they cooperate. Unfortunately, recent literatures have limited empirical
insight into this issue.
2.4 Coopetition as a strategy to shape the business
game
Business is a complex game which is not about winning and losing, nor is it about how
well people play the game (Brandenburger and Nalebuff, 1995). They argue that
companies can use game theory to develop their strategies as game theory allows
companies to understand the structure of the competitive situation and facilitates a
rational approach to decision making. Successful business strategy is about shaping the
right game to play. By ―the right game‖, they mean a shift from a win-lose (or even
alose-lose) game to a win-win game.
The traditional approach to conduct business is based on an assumption of competition.
It emphasizes that a company seeks for above-normal profits (capturing more value) by
gaining an advantageous position in an industry or by deploying distinctive
competences to offer superior products or services in relation to its competitors
(Osarenkhoe, 2010). Through the lens of game theory, competition will lead to a
win-lose scenario for a short term and end up in a lose-lose scenario. For example, a
company lowers price to gain more market shares. However, the strategy may stimulate
other competitors to offer even lower price which leads to a price war (a lose-lose
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situation). Consequently, the temporary profit provided would evaporate.
Contrarily, cooperation is a strategy through which companies share complementary
capabilities and resources for the purpose of mutual benefit. Successful cooperation is
based on trust, commitment and mutual agreement aiming at achieving common goals.
The main motive for cooperation is to create value (Osarenkhoe, 2010). The famous
game theory ―prisoner‘s dilemma‖ and ―red and blue test‖ have improved that
cooperation results in a superior outcome for all game players compared with
competition (Grant, 2010). In other word cooperation shapes a win-win game.
However, it is important to keep both cooperative and competitive approaches in mind
when shaping a business game, because the game is not only about creating value but
also capturing it. Coopetition as a strategy encourages companies to think about both
approaches to shape the game, putting themselves in competitors‘ shoes to play out all
the possible reactions as far ahead as possible. Brandenburger and Nalebuff (1995)
point out five elements of the game, namely players, added values, rules, tactics and
scope, also known as PARTS. Coopetition strategy has the potential to change these
elements to shape a right game. For example, companies can change the role of players,
including themselves. A complementor may change its role to a supplier, but still keep
the competitive perspective in mind, seeking opportunities to capture more value.
Companies can also change their business scope, the boundaries of the game in
accordance with their relationships with competitors.
2.4.1 The
propositions
of
coopetition
strategy
application
The propositions for applying coopetition strategy have not been fully explored due to
the context variables. Dowling et al. (1996) point out a series of propositions of
applying coopetition which illustrate a few general conditions (see figure6). Regarding
to practical implementation, executives need to be provided with an insight into the
nature of the coopetitive activities which could facilitate the determinants of applying
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coopetitive strategies (Walley, 2007). The profound aspects of premise, for instance,
when and in which conditions to apply the coopetition strategy for firms in terms of
input and output should be put more effort of investigation.
P1 Multifaceted (coopetitive) relationships are more likely to be found among larger firms in
concentrated industries than among smaller firms in fragmented industries.
P2 Multifaceted (coopetitive) relationships are more likely to occur in industries facing less munificent
environments.
P3 Multifaceted (coopetitive) relationships are more likely to occur in regulated industries.
P4 Multifaceted (coopetitive) relationships are more likely to occur in global industries.
P5 Supplier firms with products or services that are considered essential by buyer firms are more likely to
be involved in multifaceted (coopetitive) relationships.
P6 Firms with greater transaction-specific assets are more likely to be involved in multifaceted
(coopetitive) relationships.
P7 Supplier firms seeking to gain through opportunism may seek out multifaceted (coopetitive)
relationships that they can use to achieve competitive advantage over competitors.
P8 More powerful firms seek to avoid multifaceted (coopetitive) relationships through merger,
acquisition, or divestiture.
P9 Firms are likely to avoid multifaceted (coopetitive) relationships that affect their core competencies.
P10 Firms that cannot avoid multifaceted (coopetitive) relationships in noncore competence areas can
best adapt by decentralizing the relationship through divisionalization or departmentalization and
treating the different components of the relationship independently.
P11 Firms that cannot avoid multifaceted (coopetitive) relationships in core competence areas can best
adapt by centralizing information about the relationship through relationship managers or committees
or even by establishing inter-organizational structures to share information.
Figure 6: Propositions of applying coopetition strategy
Source: Dowing et al (1996)
2.4.2 The motives and benefits of coopetition strategy
The reasons of operating coopetition strategy are varied, however to some extent, also
concentrated, such as easier and earlier access to a large volume of network resources,
efficient knowledge integration and developments in the industry, and ability to control
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information and resource flows outside the organizational bound (Gnyawali et al.,
2006). The motives and benefits regarding coopetition are the two sides of one corn.
They might simultaneously cover a countering motive (i.e., to decrease the benefits
enjoyed by a competitor) or a clustering motive (i.e., to incorporate the resources and
competencies of each other) (Madhavan et al., 2004). The advantages created from the
strategy include the synergistic effect, specification, advantage of scale and risk
reduction (Bigliardi et al, 2011). Among those benefits, the competitive advantages
triggered by coopetition strategy are more visible and influential.
2.4.3 Coopetition and competitive advantage
Two main schools predominate the theoretical framework of competitive advantage,
one is industry position focusing on industry forces put up by Porter in 1980s; the other
refers to resource-based view and stresses on unique resources and capabilities for
organizations (Barney, 1991). Those two courses explore the essence of competitive
advantage from the perspective of industry level and internal firm analysis respectively
(Ritala and Ellonen, 2010).
The industrial organization economics (IOE) has primarily correlated to expressing and
accessing industry performance (Spanos and Lioukas, 2001). Later the view was
redefined in Porter‘s frameworks which concentrate on individual firm‘s performance
and the impact from industry forces (Porter, 1980). The essence of this perspective
stresses that a firm with an advanced market position can manipulate market power and
gain monopoly rents (Teece, 1984; Mahoney and Pandian, 1992; Teece et al., 1997).
The resource-based view (RBV) argues the source of competitive advantage for firms
in terms of heterogeneous resources and capabilities they possess (Barney, 1991;
Nelson, 1991). According to Acedo et al. (2006), resource-based theories, as a broader
theoretical framework incorporate several different streams of thought, including the
conventional resource-based view, the knowledge-based view, and the dynamic
capabilities view.
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Porter‘s theory and resource-based view have gained critique of over stressing on value
appropriation for a single company rather than on value creation in the relationship
created by coopetitive network (Gulati et al., 2000; Duschek, 2004). However, a rather
new unit of analysis have been emerging, namely network or relationship which can be
viewed as a new source of competitive advantage. Dyer and Singh (1998) introduce a
relational view and have identified four sources of inter-organizational competitive
advantage,
respectively
relation-specific
assets,
knowledge-sharing
routines,
complementary resources and capabilities, as well as effective governance.
Explicitly, the more investment put in relation-specific asset, the more relational rent
could be generated in attempt to enable long-term existence and big volume of
interactions between coopetition parties. According to Dyer and Nobeoka (2000), a
network with a strong identity and communication rules where individually tacit
language happens to exchange tends to be superior to a single firm in recombining and
creating knowledge. Furthermore, firms could gain a better competitive position with
the help the complementary resources than operating individually. Lastly, effective
governance mentioned here is associated with minimizing the transaction cost and
self-enforcing safeguard employed by the participants within the coopetitive
relationship (Ritala and Ellonen, 2010). Table 3 illustrates the main terms on each
perspective and exhibits a clear comparison.
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Table 3: A review of different types of competitive advantage
Source: Ritala and Ellonen (2010)
2.4.4Coopetition and value creation
Value net
Brandenburger and Nalebuff (1995. p.59) claim that ―game of business is all about
value: creating it and capture it‖. Thus value net was created to express all the players
and the interdependencies among them which include five components respectively,
the firm itself, suppliers, customers, substitutors and complementors(see figure7). The
value net reveals two basic symmetries in business game, the one between suppliers
and customers, and the other one is between complementor and substitutors.
Brandenburger and Nalebuff (1995) develop this model in coopetition which can be
seen as another approach of strategy formulation in comparison to the Porter‘s five
forces (Porter, 1980). Coopetition, based on its meaning, can interpret a new kind of
inter-firm dynamics when competition and cooperation frameworks take place at the
same time(Dagninand and Padula, 2002).
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customers
substitutors
company
complementors
suppliers
Figure 7: All the players in value net
Source: Brandenburger and Nalebuff (1995)
In accordance with value net model, there are eight relationships among the players
where the added relationships are the interactions of competitor and complementor
with the supplier, company and customer. The underlying logic demonstrates that a
competitor decrease the total value by taking away suppliers or customers from a
firm‘s network while a complementor usually adds value for a firm to strengthen its
attractiveness. Particularly, in line with Dagninand and Padula (2002), there are two
kinds of value added: one is economic value while the other is knowledge-related
value. Incorporating complementing resources, it seems promising to bring in
economic value directly for firms. Regarding knowledge-related value, through
communication and information flows, coopetition facilitates the added value
stocking in knowledge taking place during the expanded network. Consequently, the
knowledge creation and transfer occurs and results in a higher commitment and
incentive. Eventually, it contributes to a swift and effective transition from R&D to
production process and enhances the overall productivity (Dagninand and Padula,
2002).
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Bargaining power
As mentioned before, the value net put up by Brandenburger and Nalebuff (1995) can
be taken as an alternate of Porter‘s five forces. Porter‘s five forces is one of the
primary competition framework including five elements: industry rivalry, threat of
entry, threat of substitutes, supplier power and buyer power. Grant (2010) claims
firms in an industry compete in two types of markets, inputs market and outputs
market. Value creation takes place in two markets for both buyer and seller. However,
the value appropriation and profitability basically rest on the bargaining power of
each participant.
Regarding the factors of influencing the strength of customer‘s power, buyer‘s price
sensitivity and related bargaining power are involved. Customers tend to easily switch
to other competitors if the product they purchase is less important or less
differentiated. The bargaining power correlates to the ―size and concentration of
buyers relative to supplier‖, buyers‘ information, as well as ability to integrate
vertically (Grant, 2010, P. 76).
Grant (2010) in line with many empirical studies, points out that customer
concentration enables lowering prices in the supplying industry. What is more, the
more information buyers get about the supplier (e.g. price and cost), the better they
are able to bargain. Ability to integrate vertically refers to ―do it yourself‖ for firms
instead of finding another supply chain party to enhance its own bargaining power. On
the other hand, the bargaining power of suppliers together with the different inputs
suppliers represents the main determinants in terms of supplier‘s strength.
Unique characteristics
Unique resources create the heterogeneity which is able to explain the dependence
within a business network (Bengtsson and Kock, 2000). Barney and Hoskisson (1990)
express that companies could develop and renew their resources and preconditions
due to their unique characteristics. Therefore they can obtain a better competitive
position through their own effort. The differentiated machinery and product as well as
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the personnel knowledge and skills represent the typical heterogeneous resource
which cannot be shared with the population of competitors.
With those specific resources, a firm is able to better serve the customers than its
industry rivals thanks to the newly-generated competitive advantage. Hence,
heterogeneity appears as a means to develop the competitive relationships within a
network. Kock (1991) stresses that to ensure long-term cooperative relationships
predominantly requires securing the access to unique resources. Bengtsson and Kock
(2000) suggest that ―heterogeneity in resources can foster coopetitive relationships, as
unique resources can be advantageous both for cooperation and competition‖ (p. 421).
Besides, heterogonous resources fundamentally form a major proportion of unique
characteristic.
Considering aforementioned two elements of coopetition as well as the interaction
among five actors in the value net, we hypotheses in regard to our first research
question:
Hypothesis 1: The premises of different coopetition type are different. When applying
coopetition strategy to firms which involved in competition dominant coopetition, the
co-existence of similarity and complementary is the primary premise, while in
cooperation dominant coopetition, bargaining power and unique characteristics are
more important premises.
2.5 Coopetitors’ behaviors
The nature of coopetitors‘ behaviors can be defined by the concept of resource
endowment, which regards the possible similarity of companies in tangible and
intangible resources to gain competitive advantages (Castaldo et al., 2010). In other
words, coopetitors‘ behaviors are largely influenced by the resources they have.
Castaldo et al. (2010) argue that coopetitors are playing in the markets with a high
commonality. A high similarity of resources is helpful to understand the nature of the
competitive behaviors, while a high degree of complementariness of resources is useful
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to explain cooperative behaviors.
In the context of coopetition, both the cooperative and competitive behaviors are
different in their attributes compared to a pure cooperative or a competitive context, as
actors need to consider their double relations with the other. To maintain a strategic
coopetition is not simply about managing cooperation, but about behaving cooperative
under a competitive context. An actor needs to work with other actors in the network,
but it also needs to work against them and even in spite of them (Zineldin, 2004).
2.5.1 Coopetition and competitive behavior
Resources play an important role in determining a company‘s competitive behavior
(Gnyawali et al., 2006). Competitors with similar resources are likely to have similar
strategic capabilities and competitive strategies, which will enhance competitive
behaviors. According to Gnyawali et al. (2006), competitive behaviors can be
understood from two aspects: competitive activity and competitive variety. The former
reflects the scale of competitive behavior, referring to the total number of competitive
moves undertaken by a company to keep its competitive position. The later reflects the
scope of competitive behavior, referring to the diversity of competitive actions. The
more various actions a company takes the more difficult for its rivals to react and
imitate, hence the more competitive advantages it will gain. In other words, within a
pure competitive context, aggressive competitive actions are important for companies
to keep their position in the industry. However, in a coopetitive relationship, companies‘
competitive behaviors tend to be less aggressive and the coopetitive agreement itself
may include related rules to prescribe companies behavior (SaïdYami et al., 2010). For
example, competitors that cooperate in R&D activities to innovate new products may
choose to enter different markets to avoid direct conflict.
2.5.2 Coopetition and cooperative behavior
Competitors with different but complementary resources are likely to perform more
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coopetitive actions to achieve knowledge exchange and cross-fertilization, and reduce
the intensity of rivalry. Behaviors that guarantee successful cooperation have been
discussed in management literature, which can be concluded as trust, commitment, and
mutual agreement both in formal and informal contracts. Similar to coopetitors‘
competitive behaviors, cooperative behaviors are also different in their attribution from
those seen without a competitive relationship.
According to Morris, et al. (2007), companies with coopetition trust partners to meet
the requirements of cooperation but not undermine the possibility to compete. They
build their trust regarding how their partners will share resources and meet commitment.
In terms of commitment, Morris et al. (2007) argue that partners may have an incentive
to under-commit with a consideration of their own benefit and self-interest. Mutual
agreements are reached by the permit of mutual benefit for each party. However, a
competitive side of coopetitive relationship does not require a mutuality of benefit. The
motives to identify and work on mutual benefit largely depend on the structure of
coopetitors‘ relationship, which can be influenced by organizations‘ size and position
(Morris, et al 2007). It can be concluded that the cooperative behaviors are partly
abated by the coopetitive relationship. In order to minimize the drawbacks of
insufficient cooperation and maximize the benefit for each other, coopetitors set their
bottom lines to cooperate and carefully consider their cooperation scope.
2.5.3 Resource dependence
Resource dependence theory is a powerful explanation of inter-organizational
behaviors, which provides an approach to help developing a managerial guide into how
to maintain coopetitive relationships. The central proposition of resource dependence
theory is that the survival of organizations hinges on their ability to obtain critical
resources from the external environment (Casciaro and Piskorski, 2005). In order to
reduce the risk in unavailability to get access to certain resources, organizations try to
restructure their dependencies by using various tactics. One is to reduce the interest in a
certain resource and find an alternative substitute. Another is to constrain partners in a
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relationship. For example, a company can stabilize the flow of resources by exchanging
information and technology with its partners. Casciaro and Piskorski (2005) stress two
important dimensions of resource dependence, power imbalance and mutual
dependence, which affect organizations‘ ability to reduce dependencies.
―Mutual dependence captures the existence of bilateral dependencies in the dyad,
regardless of whether the actors‘ dependencies are balanced or imbalanced.‖(Casciaro
and Piskorski, 2005, p.170) In a balanced dependence situation, if the mutual
dependence is low, actors are less dependent on each other, because alternative partners
are more available to them. If the mutual dependence is high, actors would face big
uncertainty if exchanges between them fail. However, in an imbalanced dependence
situation, one actor depends less on the other actor, either because the other actor
provides less critical resources to it, or it has many alternative partners can choose
from.
Power imbalance is defined as the difference in the power of an actor over other actors
in the relationship (Casciaro and Piskorski, 2005). In the relationship where actor A is
less dependent on actor B, when the exchanges between them fail, it is easier for A to
handle the situation, while B will face greater uncertainty. As a result, A will has more
power to dictate the relationship with B.
Power imbalance exists under different levels of mutual dependence (Casciaro and
Piskorski, 2005). When mutual dependence is low, the obstacles of exchange
negotiation generated by power imbalance are of less concern to the actors as they have
access to resources provided by other suppliers. By the contrast, in a high mutual
dependence situation, the obstacles induced by power imbalance may lead both actors
to loss benefit, as mutual satisfaction is less likely to be fulfilled under the unequal
power condition.
We suppose the resource dependence theory can also explain firm- customers‘ and
landlord-tenants‘ competitive behaviors. We hypothesize as follow:
Hypothesis 2: Resource dependence can influence coopetitors’ relationships and
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further affect coopetitors’ behaviors.
Hypothesis 3: In the low-mutual-dependence condition, actors behave competitively
regardless their power imbalance. However, in the imbalanced dependence situation,
the actor who has both power disadvantage and dependence disadvantage has more
cooperative behaviors.
2.6 The critics of coopetition
We mean that business relationships entail costs and problems that warrant some
attention [. . .] It is argued that the burden of relationships is the other side of the
benefit potential [. . .] it is the automatic consequence of the development of a fruitful
relationship [. . .] Close relationships can sometimes become ―black-holes‖ as mutual
expectations increase and thus demand on each other’s resources increases.
(Håkansson and Snehota, 1995)
The major attention of coopetition has been paid to creating benefit and facilitating the
long-term relationship in academic work. However, cooperation and the benefits it
brought can be counterbalanced by burdens and conflicts. After sorting the theoretical
approach of coopetition, it is found that rarely previous researchers have published the
dark-side consequences(Zineldin, 2004).
Coopetition is rather dynamic process with the movement of competition and
cooperation. Zineldin (2004) expresses that values of cooperation change over time and
so does the development of a relationship. The later one relies on the way that each
participant interprets, re-interprets, and behaves during the period of forming the
relationship. In addition, hidden costs in a close relationship seem rarely been taken
into account, most of the time they are invisible. Moreover, according to Bengtsson and
Kock (2000), conflict occurred in intra-partner, inter-role, inter-partner, and personal
can jeopardize the coopetitive relationships due to lack of experience and extra cost of
time and effort. Managing and controlling the cooperation and competition activities
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tend to be much costly as for a coopetition strategy. Power and dependence are also
sources of conflict. Coopetitive relationships could possibly remove flexibility and
increase the vulnerability for a single firm (Zineldin, 2004).
2.7 Service management
Looking back to the literature review sorted by authors in table 2, coopetition is studied
in the industries such as steel (Gnyawali, et al., 2006), automobile industry (Dagnino
and Padula, 2002), food, information, wood processing (Osarenkhoe, 2010).
Coopetition in service industry seems rarely to be paid attention. Therefore, it exhibits
an opportunity to conduct a study in service industry with service management as a
particular focus.
Theoretical framework of service management will be demonstrated in the following
parts initiated by service dominant view. Service management commonly can be
perceived as intersection between the goods/service provider and the customer, as well
as an integrated process of supply chain management. The objective of performing high
quality service management presents optimizing the service-intensive supply chains
(more complex activities than the traditional goods supply chains). This emerging arena
has obtained more attention because of awareness and importance of service dominant
logic (SDL).
2.7.1 Service dominant view
Vargo and lusch (2004a) claim that service has emergently replaced conventional goods
and becomethe common dominator as the focus of market and in exchange. Thus they
point out the SDL of marketing tends to be the more penetrating and comprehensive
foundation (Payne et al., 2006). SDL stresses on the importance of operant resources
(e.g. service, experience, knowledge and competences)since they can impact on the
products and create value for individuals or organizations (Vargo and lusch, 2004a).
Service dominant view is identified as being largely associated with value co-creation,
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which especially emphasizes the roles of customers. In addition, Gronroos (2006) notes
that customers in this situation actively participate in the value-creating process.
Value co-creation
Prahalad and Ramaswamy (2000) illustrate that value can be better co-created by
incorporating customers into the network. In recent years, customers have the
increasing access to participate in the value-created activities, for instance, product
design and delivery (Payne et al., 2006). Additionally, a more important part of
co-creating value represents the customers‘ feedback which helps to re-shape the
company‘s operating concept. In line with SDL, suppliers instead of directly
delivering value to the customers, support the process of value generating in
marketing section. Therefore Gronroos (2006) claim that is the dominating
value-creating process where customers possibly get involved in value co-creation
activities through goods, competencies, ideas, and information provided by suppliers,
to mention but a few.
Service quality
Quality is commonly viewed as the key means of competition and a prerequisite to
meet customers‘ satisfaction and profitability (Edvardsson et al., 1994). Gronroos
(1982) also contends that customer often compare the service they expect with their
perception of received service as a way to evaluating the quality. Service quality has
been defined as a customer-oriented concept, that is the ―service should correspond to
the customers‘ expectations and satisfy their needs and requirements‖ (Edvardsson,
1997, p.33). Additionally, he points out that service quality is perceived by the
customers which stresses on the active role of customers during the service activities.
Parasuraman et al. (1985) state three well-portrayed characteristics of services, i.e.
intangibility, heterogeneity and inseparability. Based on these features, service quality
tends to be more difficult for customers to evaluate than goods quality. In addition,
two types of service quality exist to determine the overall judgment from customers;
one is technical quality meaning what exactly customer receive and the other presents
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the functional quality in regard to how the service is delivered (Gronroos, 1982).
Lehtinen and Lehtinen (1982) also mention three other quality dimensions, explicitly,
the physical quality, corporate quality and interactive quality.
2.7.2 Service management system
From the customers‘ perspective, service is combined by their experience and
perception of the outcome of the service. Johnston and Clark (2008) argue that service
value is one of the important elements of service outcome. It is defined as the
customer‘s assessment of the benefits of the service weighed against all the cost,
including price and inconvenience. The benefits are not only the tangible benefits but
also the feelings got from the experience. It can be said that what customers buy is not
only the elements of a service but something usually intangible.
Service management is concerning with delivering service to the service users. It
includes understanding users needs, managing the service delivery, as well as
improving the service quality (Johnston and Clark, 2008). Normann (2002) defines a
conceptual framework on the structure of service management called service
management system (see figure 8). The components include the service concept, the
market segment, the delivery system, the image and the business culture and
philosophy which inter-connect with each other.
According to Johnston and Clark (2008), ―The service concept is something more
emotional than a business model, deeper than a brand, more complex than a good idea
and more solid than a vision. It is something that can unite employees and customers‖
(P40). Service concept is constituted by the core concept and the peripheral where firm
pay different attention. By looking at core service and peripherals on offer, it can be
explained through the description of service package. In the case of airline
transportation, the actual transport of client from one city to another tends to be more
important than reservation of seat, providing food on the flight or the cleanliness of
the airport. The service benefits clients obtained in a service system is to use physical
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product as a metaphor to list everything possible to be offered (Norman, 2002). Thus
in many cases, the core service could be physical product or the extension from
product to service, for example, the lifestyle or atmosphere found out in IKEA China.
Market segmentation refers to the particular type of client that the entire service
system was designed to. It is based on customers characteristics, say incomes,
geographic region, and lifestyle. Service provided may consist of organizing and
managing customers, which mirrors that market segmentation has to base on the
clients need and his/her willingness to ―allow another organization to effect his way of
functioning.‖ (Normann, 2002, p.129) Therefore, when concerning market segment,
the customers‘ competence and willingness to participate and the participation style
posit more crucial role, which largely rest on customer‘s knowledge and how they
would utilize them. Understanding the needs of the customers in the segments would
help firms manage customer relationships well.
The service delivery system pointed out here is often diversified in character while can
be ―equivalent of the production and distribution system in manufacturing
organizations‖ (Normann, 2002, p. 59). Service delivery system is designed in
accordance with a firm‘s supply chain characteristics and the degree of customers‘
involvement. Traditionally, service providing firms are in charge of delivery activities
while customers tend to be rather passive during the process; however, recently clients
in increasing cases take an active role in delivering system, for example, self-service
in restaurant and IKEA stores. Good service is the result of the carefully designed
delivery system which involving a whole set of interrelated activities, and supported
by skillful delivery people as well as other materials and equipment (Johnston and
Clark, 2008). A experience of poor service experience could result from a lack of
coordination of activities. For example, a service people in a hotel promise you that
they offer hot shower water without knowing that there is something wrong with the
warming system on that day.
Image is regarded as an information tool that helps firms distinguish from competitors
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and create identity in the long run. Image can be taken as an instrument of
communication. Normann (2002) brings image and reality rather closely. Influencing
people‘s images which demonstrate the way of perceiving reality is a management
tool with great potential, according to Kets de Vries (1980). Furthermore, image
generates the purposeful behaviors which tend to justify and reinforce image if
successfully. The image derived from the service company would be largely
determined by the nature of service, the culture and organization, as well as
market
segment.
The culture and philosophy as the last element in this system is often hidden, and
acted out by employees‘ attitude and behaviors. It shapes and rejuvenates the unique
―values and ethos on which the company thrives‖ (Normann, 2002, p.60). Johnston and
Clark (2008) emphasize that ―understanding and influencing organizational culture is
central to delivering a consistent service‖.(p 482) Culture is the basis of collaborative
human behavior, including the set of beliefs, norms and values which are fairly stable.
However, it can be changed in business context, somehow effectively if under right
circumstances. Each industry or company have some special inherency of culture
which is unique and easy to discover, for instance, ―most airline companies have a
military establishment and pioneering enthusiast spirit‖ (p.215). There is no doubt that
culture and dominating ideas are important management tool particularly in service
organizations.
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Service management system
The market
segment
The service
concept
The culture
and
philosophy
The delivery
system
The Image
Figure 8: The service management system
Source: Norman (2002)
As mentioned before, service industry is rarely involved in the discussion of
coopetition. However, due to its raising importance and its relevancy with coopetition
as considered after investigating the theory, it is reasonable to study the niche between
coopetition theory and service management. In line with the advantages brought by
coopetition, the service management serves as a tool to detect the benefit or
contribution of coopetition to service industry.
Coopetition is constituted by competition and cooperation taking place simultaneously.
To compete with other, the firm has to realize its differentiated advantage in
comparison with the rivals. It enables the firms to better their performance and improve
the service quality relating to the participants of service industry. Cooperation normally
highlights the generation of added value, which can lead to the customer value
co-creation. Hence, different types of coopetition shed light on distinctive roles for
service management. In attempt to discuss this issue, we come up with the fourth
proposition that is concerning how does coopetition contribute to service management.
Hypothesis 4: Coopetition can contribute to the service management arena.
Competition dominant coopetition enhances service quality in terms of product
diversity and customer satisfaction, while cooperation dominant coopetition facilitates
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the customer value co-creation.
2.8 Summary and hypotheses
To sum up, in this chapter, we reviewed previous ―coopetition‖ researches regarding
coopetition concept, coopetitive relationships and behaviors, motives for coopetition
strategy, as well as the limitation of coopetition. We also discussed the theories of
competitive advantage, value creation and service management, which are related to
our further analysis in the rest of the paper.
As it is showed in Table 1, most of the researches are focused on a network level, in
which coopetition takes place among two or more companies. However, the coopetition
knowledge in single firm level tends to be undervalued which leads a gap for
continuous contribution to this arena. Due to the characteristics and complexity of firms‘
structures, coopetition can be identified in single firm level, with two coopetition types,
i.e. competition dominant coopetition and cooperation dominant coopetition. Moreover,
we state four hypotheses with respect to our three research questions.
Hypothesis 1: When applying coopetition strategy to firms which involved in
competition dominant coopetition, the co-existence of similarity and complementary is
the primary premise, while in cooperation dominant coopetition, bargaining power and
unique characteristics are more important premises.
Hypothesis 2: In the low-mutual-dependence condition, actors behave competitively
regardless their power imbalance.
Hypothesis 3: In the imbalanced dependence situation, the actor who has both power
disadvantage and dependence disadvantage has more cooperative behaviors.
Hypothesis 4: Coopetition can contribute to the service management arena,
competition dominant coopetition enhances service quality in terms of product
diversity and customer satisfaction while cooperation dominant coopetition facilitates
the customer value co-creation.
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3 Methodology
3.1 Overview of research design
According to Bryman and Bell (2007), research design represents structure and
guidance for the execution of the research methods. The research design includes five
categories, explicitly, experimental design, surveys, case study design, comparative
design and longitudinal design (Bryman and Bell, 2007). Though all these five
columns have distinctive means to form a research, they share three common criteria,
reliability, replicability and validity. Our research design applies the case study with a
focus on comparison of two firms. More specifically, the research is conducted in
qualitative and deductive approaches which are in the following demonstration.
3.1.1 Case study research
The case study is a necessary and sufficient method for certain important research
tasks in the social sciences, and it is a method that holds up well when compared to
other methods in the gamut of social science research methodology.
(Flyvbjerg, 2001)
According to Bryman and Bell (2007), case study belongs to the scope of research
design despite quite often considered as a research method. Simply selecting a case
subject does not automatically equip one method with data which, however, should
take place in the post-case selection stage to find out which type of research method
match that particular case (Bryman and Bell, 2007). Stake (2005) stresses that case
study presents the most common way to do research in respect to qualitative inquiry
by which researchers could easily understand a complicated phenomenon and enrich
existing theoretical framework (Yin, 1994). The case study in our research is not in a
single case scope, but a dual and comparative case study. Flyvbjerg (2001) notes that
case study can help analyzing in depth despite limited in breadth whereas large
sample approach offers more in breadth but lack of depth.
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3.1.2 Choice of case company
The case companies we chose, IKEA China and Red Star Macalline, are both
well-known in furnishing retail industry in China. Reasons of choosing the furnishing
sector and the representatives tend to be multitude, including the industry
characteristics, the success of their business and their unique business models which
reflect two types of coopetition.
One of our research problems is to detect the association between coopetition and
service management. Furniture industry, though as a conventional goods-oriented
sector, has gained increasing added value and attention of service management. It can
be viewed as moving toward the service industry and is greatly impacted by service
management. As mentioned in frame of literature, service management system put up
by Normann (2002) serves as useful and applicable tool of analyzing the components
of service management. We adopt service management system to make a close look at
Red Star Macalline and IKEA China‘s service and further investigate the contribution
of coopetition to service management.
Besides, these two companies have superior performance in Chinese market with
respect to customer volume or number of the outlets. Many academic work and media
awareness have been focusing on certain themes related to these two firms. Hence
there are plenty of academic or published materials in use which could provide
intensive secondary data. In addition, the two firms exhibit remarkably different
features in terms of business model, strategy and culture, etc. The more diversity they
present, the more precise conclusion we get.
3.2 Research approach
3.2.1 Qualitative approach
The empirical part of the research adopts the qualitative approach. Unlike quantitative
approach which is used when one tests for confirmation of a theory, qualitative
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approach is applied to develop a theory to explain what has been experienced
(Newman and Benz, 1998). Qualitative methods are effective in obtaining specific
information about opinions, behaviors and values. According to Finlay (2005),
qualitative research usually goes beyond the numbers and helps us understand the
issue better.
The main theme of our research question and area can be well addressed by
conducting qualitative research in case study. It is not aimed to have a huge amount of
number to draw a final conclusion by quantitative approach. Particularly the chosen
research method has to be in line with the purpose of thesis. As mentioned in sector of
purpose statement, we attempt to explore the premises of applying the coopetition
strategy and analyze the reason behind competitive behaviors of firms and relative
issues with service management. Thus it is not applicable to have quantitative
research to deal with the aforementioned questions.
From another perspective, after sorting the literature to list a few theoretical
hypotheses, we put them into the case context and examine the validation of those
hypotheses. Therefore, in this sense, it is also a deductive research with a new
contribution to the body of knowledge of coopetition strategy. Since verifying the
hypothesis is part of the job for research design, the empirical data provides the
context for testing them. Moreover, the research design also possesses the character of
explanation since coopetition strategy is a rather new concept. Explaining the relevant
information and analyzing research questions accompany with each other and end up
with a new set of knowledge as the contribution.
3.2.2 Deductive approach
When it concerns theory with reality in academic writing, two main approaches come
to researcher‘s mind, namely deduction and induction (Jacobsen, 2002) (see figure 9).
Deductive approach refers to that a clear theoretical position has been pointed out
before collecting data. The finding would be to what extent that empirical data
confirm theory and get to know whether there is congruence and gap between the
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theoretical framework and reality (Jacobsen, 2002). Crowther and Lancaster (2008)
express that a deductive research is applied to test the hypotheses and develop the
theory throughout the empirical observation. ―It is essentially a test of techniques for
applying theories in the real world in order to test and assess their validity.‖
(Crowther and Lancaster, 2008, p. 23)
Induction, on the contrary to deduction, can be characterized as developing theory
from huge amount of empirical data. The theoretical framework has not been defined,
and with the way to get a fresh theory through a deep investigation from information
in practice (Saunders et. al, 2007). As mentioned before, the aim of the thesis is to test
new hypotheses on the basis of past theory and test them through empirical
scrutinizing. Thus this thesis uses a deductive approach rather than inductive
approach.
Test
Theory
Empirical data
Deductive approach
Develop
Empirical data
Theory
Inductive approach
Figure 9 Deductive and inductive approach
Source: Jacobsen, (2002)
3.3 Data collection
―Research method is simply a technique for collecting data. It can involve a specific
instrument, such as a self-completion questionnaire or a structured interview
schedule, or participant observation whereby the researcher listens to and watches
others‖.
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(Bryman and Bell, 2007, p. 40)
Gathering data is such a crucial process for each research, besides qualified and fairly
processed data can lead to the good and valid research (Dalen, 2008). Commonly the
source of data can be categorized into two types, namely primary and secondary data.
The primary sources of data are first-hand information from experiments, interviews,
observations, surveys and tests while secondary sources point out as findings
accomplished by other authors through articles, books, essays and so on (Thomas,
2003).
There are a variety of instruments to gather both primary and secondary data, among
which observations, questionnaires, interviews and experiments are the most common
in use of collecting data (Thomas, 2003; De Marrais and Lapan, 2004). The
development of questionnaire can be taken as a representation of the quantitative
method. Since it is able to facilitate the understanding of issues in question, scholars
could generalize the collected data, extract the essence to make hypothesis, later, to
provide some implications (Limpanitgul, 2009). Regarding qualitative data, Patton
(2002) expresses that three techniques can be implemented respectively, open-ended
interviews, observations and documents.
Sticking to a single research method seems still popular in numerous cases; however,
it has become widely common to apply a mix of two methods or more for research
designs, especially, a well-organized and structured combination of qualitative
interviews with quantitative surveys (Bryman and Bell, 2007). Thomas (2003) also
claims that single or mixed methods of data collection can be used on the base of
boundaries of the study whereas the mixed method is the most common recently.
Furthermore, primary and secondary information sources are applied in those research
methods which enable enriching the content of the research and providing certain
reliability for the obtained results.
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The present thesis uses both primary and secondary sources for data collection where
the primary sources come from interviews and observations to support the empirical
part and secondary data is rooted from academic sources and documentation.
3.3.1 Primary data
The primary source of gathering the empirical data is interview and observation. The
case companies are located in China so that we have to contact them in distant.
Interview
The so-called open-ended interviews are functioned as yielding direct opinion from
people (Patton, 2002).This part of data collection is conducted via semi-structured
interview which means interviewers can ask additional questions related to the topic
and the answers of interviewees. The interviews contain around 10 questions which
were aimed to collect the respondents‘ reflection on the coopetition strategy exhibited
in each case company. Actually we considered to send out questionnaire to
interviewees of each firm by which it would turn into a more flexible and less time
consuming way to communicate with them. The interviewees can choose whenever
they are available to finish it before the deadline we set. Nevertheless, the answers to
questionnaire turned out to be superficial and less thorough than we expected.
Therefore we arranged several interviews in March with IKEA China and Red Star
Macalline(Figure 10 shows the interview schedule). The channels of taking interviews
covered email and telephone. We contacted IKEA China‘s public relations (PR)
manager and corporate PR manager via email. While for Red Star Macalline, we
made the interviews through the phone call with the specialists in marketing
department. One of them is in charge of brand launching and the other one works on
market intelligence.
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3.14-3.16
IKEA
Master Thesis
China
LocalPRspecialist in Shanghai,
Limin Chen & Shuai Hao
3.14-3.20IKEA China Corporate
PR manager, Ms. Xu
Ms.Yin
3.14
3.20
3.24
Date
3.20-3.24 Red Star Macalline.Mr. Li, a
3. 16-3-18 Red Star Macalline.
specialist in brand development .
CiciFeng, specialist in marketing
intelligence.
Figure 10: interview schedule
Source: Authors’ own creation
Observations
Observations correlate to involve visiting a community and watching the phenomena
to generate the curious questions. It is also a main qualitative means of gathering data
from the objectives. As the time and financial limitation, we did not visit IKEA China
and Red Star Macalline in person. Instead, we asked our friends and parents did for us.
They visited IKEA China‘s shopping mall in Beijing and Red Star Macalline‘s in
Xiamen. We refer their description of the atmosphere as well as the photos taken in
shopping malls.
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3.3.2 Secondary data
The majority role of secondary data is providing the basics of literature. The
processing and refining of primary data tends to be the sources of secondary
information and enables to partly address the research question. The existing studies
on this subject and relevant articles for case analysis construct the main body of the
secondary data. Particularly, in our case, it is in the form of academic literature in
library as well as the data base in Linkoping University predominantly.
Academic resource
The main academic literatures we use consist of the books of strategy, coopetition,
service management and research method. Meanwhile, the report and articles on
authoritative websites and media also serve as the source of secondary data. Rarely
are they in use as the concrete evidence, however, they can motivate our thoughts,
especially some comparative analysis of furniture companies. Some reports from
industry consultancy provide another important resource, for example, in background
part, the analysis of furniture market structure and the characteristics for different
players.
Documentation
According to Patton (2002), documents as a means of gathering secondary data
includes written materials and other documents from organizations, media, letters
responding to open-ended surveys and so on. Documents represent a particularly
important source in our case for gathering published information. This sector of
empirical data mainly comes from the company publications. Unlike the global
well-known companies, this kind of national Chinese firms like Red Star Macalline
do not possess extensive academic publications except the annual report. Nevertheless,
there are quite a few publications on the website which state the updated information
about the company and the industry. The document study is applied to avoid one side
analysis.
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3.4 Reliability and validity
Patton (2002) states that validity and reliability are two factors that any qualitative
researcher should concern about while designing a study, analyzing results and
judging the quality of the study.
The term ‗Reliability‘ is a concept used for testing or evaluating quantitative research,
however, the idea is most often used in all kinds of research (Golafshani, 2003). It
was argued that to ensure reliability in qualitative research, examination of
trustworthiness is crucial. Establishing good quality studies through reliability and
validity in qualitative research, states that the ―trustworthiness of a research report lies
at the heart of issues conventionally discussed as validity and reliability‖ (Seale,1999,
p. 266). We believe that our research is fairly reliable. Firstly, our research was
conducted in two companies with two coopetition types, which provides solid
evidence to test our hypotheses. Secondly, the first hand data we got from IKEA
China and Red Star Macalline were offered by related managers and specialists,
which were official and trustable. Thirdly, the secondhand data were collected from
companies‘ homepages and Chinese and English news published by authoritative
media.
Validity is ―concerned with the soundness of findings that specify causal connection‖
and also about possibility for application to the relative field (Bryman and Bell, 2007,
p.63). In other words validity criterion is related to the contribution made by the
specific findings. Validity and reliability are not closely coupled, thus high reliability
does not provide high validity automatically. However, high validity provides high
reliability (Rosengren and Arvidsson, 1997). We claim the results of our research
could be applied in other companies within the similar industry. First of all, the
promises and the driving force behind the coopetition we studied would provide
companies tips on when it is possible to implement coopetition strategy and how to
deal with coopetitive relationships with their partners. Moreover, by relating
coopetition and service management system, we highlight the contribution of
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coopetition to service quality. We believe companies in service industry could
consider a coopetition strategy to improve their service.
3.5 Limitation
The limitation of our research method derives from different aspects. The prime
weakness in this research design is lack of sufficient empirical data. Due to the
uniqueness of the topic and certain challenge to collect the enormous first-hand
information for individual company, the entire dissertation is theoretical-oriented.
Besides, as IKEA China and Red Star Macalline is running their business in China,
while we wrote our thesis in Sweden, the limited time and financial resources cause
obstacles to personal observations.
Secondly, as the consequence of distance limitation mentioned above, it is difficult to
arrange interview time, so we were not able to conduct face-to-face interviews.
Face-to-face interviews are efficient means to share in-depth knowledge which helps
to analyze the results and develop the bigger picture (Finlay, 2005). We contacted
Red Star Macalline‘s business planning managers through telephone and IKEA
China‘s RP managers via email instead. We realized that it may lead to some
misunderstandings since we could not get the direct feedbacks from each other.
Furthermore, since we did not get access to the top management‘s view on coopetition
strategy we could not provide evidence on the contribution of coopetition strategy to
corporate strategy.
Finally, one thing we need to mention is that a big part of the secondary data we used
was written in Chinese. We tried to present the original meanings when we translated
them into English in our quotations. The case context (i.e. industry and company) are
based in China so that we relied on quite a lot published information in Chinese. The
news or data of the companies in English is rather a minor proportion. The
aforementioned weaknesses might construct a few challenges for our research design;
however, we are confident about its quality and logic.
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4 Empirical Data
As mentioned before, we investigate two furnishing retailers in China. It is necessary
to understand the context of Chinese furnishing industry.
4.1 The furnishing industry in China
China‘s furnishing market has been growing rapidly since China started its
market-oriented economic reform. The total sales revenue for furniture manufacture
industry was 61.58 billion USD in 2010, increased by 31.85% compared with year
2009 (Italian Trade Commission, 2011). According to the marketing research report
from Li & Fung Research Centre (2011), China‘s retail sales of furniture for
enterprises above designated size increase 37.2%, reaching 70.5 billion CNY(10.8
billion USD) in 2010. The driving factors of the industry growth includes rising
income levels, growth of middle class consumers, real estate boom, increase in
urbanization, strong distribution network, etc. It can be concluded that the year 2010
was a flourishing year for furniture industry in China.
The low entry barriers and promising furniture market in China has attracted many
retailers to join. They operate in their own retail channels. Li & Fung Research Centre
(2011) shows four major retail channels for home products in China: Specialty stores,
which sell specialized product categories, e.g. Beyond and Markor; Furniture marts,
which source and sell a broad range of home products, e.g. IKEA and Hola;
Mono-brand furniture shopping malls, which lease out retail space to different home
product brand companies, e.g. Red Star Macalline and Easyhome; Online platforms,
e.g. Dangdang. In recent years, both domestic and foreign furniture retailers have
competed aggressively to share the big market pie. Data shows the number of
furniture and furnishings outlets increased by 10% to 112,000 in 2010 (Li & Fung
Research Centre, 2011). The rapid expansion of local and foreign furniture retailers
has resulted in fierce competition, which makes it difficult for retailers to raise prices.
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What is more, the growing operating and labor cost makes the profit margin even less.
However, there are still some furniture retailers that handle their business successfully
and becomes more and more popular in China, such as the companies we chose for
our case study: Red Star Macalline and IKEA China.
4.2 Red Star Macalline
Red Star Macalline was established in 1986 with the objectives to create the
comfortable home and enhance the taste of home furniture. In over 80 cities in China,
there are already 100 Red Star stores in 2012. The firm‘s strategy for operating
business refers to the chain store nationally and bundled brands. The structure and
appearance of stores have been improved and strengthened during decades, from the
first generation to the 8th generation (Figure 11). In 2008, the sales revenue in each
single city has been ranking the first, leading Red Star Macalline to be the top in
furniture retailing of China (Red Star Macalline, 2012).
Figure 11: 8 generations of Red Star Macalline stores appearance
Source: http://www.chinaredstar.com/
During the development of the company, the western style of business model-the
supermarket and mall-has been introduced. In this way, Red Star Macalline was able
to gather and arrange the diverse products from different brands, besides, adopted the
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bundling strategy in sales. The firm clarifies its responsibility of selecting the brands,
controlling the product quality as well as providing the overall service, such as
distribution and after-sale management. Now the leading furniture chain offers
creative shopping concepts. For instance, it constructs the in-house metro train inside
one shopping mall instead of lift. Another example of the building‘s interior design
decorated by many trees and water landscapes points out the claim of being China‘s
first park-style shopping complex (Figure 12).
(Shanghai, China, opened in 2008, 14 meters, 6 stations)
The new Red Star Macalline store in Shanghai has one of
the most unique monorails in the world. The furnishing
store features a mini-monorail system that spirals it is way
up inside the stores six stories, stopping on each floor. The
14-meter long system is the first of its kind in the world.
Gallery? Amusement Park?
Museum?
The answer is no. It claims as
being China‘s first park-style
shopping complex.
Figure 12: Red Star Macalline’s creative shopping concepts
Source: http://www.bychinese.com/red-star-macalline.html
The product portfolio includes home furniture, kitchen series, bathroom accessory,
constructing materials as well as office furniture and so on. The products in the
shopping mall cover nearly a hundred renowned national and international brands
(Red Star Macalline, 2012).Customer could find whatever they need for decorating
their houses in Red Star Macalline.
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4.2.1 Competitive behaviors of Red Star Macalline
Competitive behaviors can be understood from two aspects, competitive scale and
competitive scope (Morris, et al., 2007). In Red Star Macalline, though brand vendors
could not differentiate themselves from after-sale and delivery service, their
competitive behaviors are presented in various products design and marketing
activities.
―Red Star Macalline‘s bundled brands business model offers a fair competitive
platform for all the brands settled in the shopping mall‖, said Cici Feng, the brand
development specialist in Red Star Macalline‘s Shanghai headquarter. Brand vendors
compete via their products diversity and service qualities as well as images. For
example, the luxury foreign brands, Ralph Lauren, Versace, NATUZZI in Red Star
Macalline‘s shopping mall have their own focused furnishing categories such as sofa,
chair or table cloth. Actually, their brands differentiate them from each other, so price
competition tends to be rather weak (Figure 13 shows different style of chairs of
Versace and Ralph Lauren).In addition, Red Star Macalline encourages the
competition among brand vendors, for instance, every month, it praises the best
performed vendors and salesmen (see figure14). Under Red Star Macalline‘s
administration, all the brands can take part in the united sales promotion activities. ―It
is not a compulsive activity, however, most vendors would like to join‖, said Cici
Feng. The competition among different brands becomes fiercer during promotion
periods.
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Ralph Lauren
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Figure 13: Different style of chairs designed by Versace and Ralph Lauren
Source from: http://guoji.pchouse.com.cn/mingpin/1109/131252_2.html
Figure 14:A bulletin board shows excellent
salesmen and vendors in Xiamen Red Star
Macalline
Source: Authors’ own observation
4.2.2 Service management in Red Star Macalline
The core product in Red Star Macalline is the diversified and clustering furnishing
product while the peripheral product is the high-standard service and shopping
environment. Red Star Macalline initiated the conversion from furniture retail stores
toward shopping malls in China in order to provide a customer friendly shopping
experience. Customer can easily find what they need in specific floor with clear
instruction and guiding service. In each floor of their stores, the products are arranged
according to styles, function and price. ―What we sell is not just products, but also the
feeling and the experience‖, said Cici Feng.
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The market of Red Star Macalline, the same as other furniture retailers, is segmented
by income level and age. The target customers are the consumers with middle and
high salary. Since opening its first shopping mall in 1997, the company has attracted
more and more customers with higher salary thanks to the increasing brand reputation
and high-end product portfolio. However, low income groups can also be involved in
Red Star Macalline as the company opened its cafeteria with cheap food in attempt to
lure those customers to start walking into the stores.
The delivering system of Red Star Macalline includes two parts, firm offering and
self-service. The firm keeps the Chinese tradition of free home delivery service;
however, in order to cater a number of consumers who prefer self-service, the
company adopts the advantageous hybrid system. Customers would not be
accompanied with salesperson when they walk inside the stores.
Regarding the image, it has both internal and external perspectives to interpret it.
From the internal side, the employees of Red Star Macalline perceive their company
as a learning organization and getting inspiration from industry competitors with good
performance, said Mr. Li. By offering free furnishing decoration consultation service,
Red Star Macalline also deliveries a senior consultant image to customers. From the
external side, the outstanding shopping mall outlet and the high-end shopping
environment help customers self-express their status and fashion taste.
Culture is one of the most complicated concepts to portray an organization. Red Star
Macalline expresses its home culture intensively to the customer and sets Dec, 3rd as
the Home Day. The company leads a new era of home furniture industry and
highlights the awareness of life concept and high life quality. It also claims that the
home accessories are not simple products, but stand for the love of people‘s home and
life (Red Star Macalline, 2012).
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4.3 IKEA in China
―At that time (when IKEA entered Chinese market), there were not so many foreign
brands here, and IKEA was a completely new experience for the Chinese people. And
IKEA furniture of course also represented a whole new style for them.‖
(Virginia Ni, PR specialist at IKEA’s Beijing store)
IKEA is the world's largest furniture retailer, founded in 1943 by Ingvar Kamprad in
Sweden. The company is a globally renowned home products company, primarily
designing and selling ready-to-assemble furniture at low cost. As a household brand
based in Sweden, IKEA has owned 316 stores in 38 countries around the world till
2011. IKEA products are all designed by the company itself, emphasizing products'
simple, natural, fresh for common customers (IKEA, 2012).
IKEA entered in the Chinese market in 1998 and built the first store in Shanghai
although that store was much smaller than a standard IKEA store (Li, 2007). One year
later, another store in Beijing, the capital city was open to public. The development
has been slowly preceded over 10 years in terms of the number of malls. In 2003,
IKEA built its first full-scale standard IKEA store in Shanghai which has become the
largest IKEA store (33,000 square meter and selling over 7,000 product) not only in
China but also in other Asian countries at that moment (ibid).This new Shanghai store
created a new stage for IKEA‘s business and development in China. It also leads to
the mass employment recruitment and business expansion in other cities (Li, 2007).
Though with 10 stores in the major cities, IKEA has attracted increased attention of
customers, especially young generations. The lifestyle consumption and the Swedish
romance derived from IKEA tend to be the center of focus and motivation. Moreover,
Ms. Xu, the IKEA China corporate PR manager said to us, IKEA China‘s PR team is
working more closely with social media since October, 2010 to promote IKEA brand.
For example, it created its own profile page on Douban, a popular Chinese social
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network website among well-educated and creative Chinese. It puts tips on decorating
homes with IKEA products and launches events which encourage Douban users to
discuss their dreamed homes and furnishing style. IKEA successfully attracted active
engaged Douban users. Through the effect of both on-line and off-line activities, in
2011 IKEA China achieved total sales of 4.9 billion CNY (about 775 million USD)
and attracted 31 million customers visiting its stores (The China Observer, 2012).
4.3.1 Cooperative behaviors of IKEA China
Behaviors that guarantee successful cooperation can be concluded as trust,
commitment and mutual agreement both in formal and informal contracts (Morris, et
al 2007). Ulf Smedberg, marketing manager of IKEA China described IKEA's
mission as ―to provide smart solutions for homes by implementing three criteria: good
design, functionality, and low price.‖ (Miller, 2004) This is the commitment that
IKEA China made for Chinese customers and IKEA has been managing to fulfill it.
―In order to build trust with Chinese customers, IKEA has made many adaptations in
China‖, said Ms. Xu. One of the biggest changes to make is the name. The letters
―IKEA‖ was accompanied with Chinese characters meaning of comfortable homes,
which is much easier for Chinese to remember and build the emotional bond with the
firm (figure 15).
Figure 15: IKEA’s logo in China
Source: http://news.bbc.co.uk/2/hi/business/4491128.stm
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The second thing that has been changed is the prices. IKEA‘s home products get
prevailed in European market by the low price, but not in China. ―A small wooden
table costs several hundred Yuan (1 USD equals to 6.3 Yuan) and a paper lampshade
costs about a hundred‖ (Franchiseek, 2005). Most of the visitors come to buy small
household goods or just to experience the atmosphere. Nowadays, the prices in
IKEA‘s Chinese stores have been slashed across the board by over 50 percent. ―We
keep reducing our prices every year so that more people could afford them‖, Virginia
explained (Malmefjäll, 2010).
The third thing is the assembly and delivery service. Ulf Smedberg commented that
IKEA's DIY (Do it yourself) products and self-delivery are much popular in the West,
because customers know they will save money by assembling and delivering products
themselves. But in China, where labor is cheap, the DIY notion does not make sense
(Miller, 2004). Now IKEA offers local home delivery and long-distance delivery to
major cities in China for a fee, and offers charged assembly services.
With all the adaptation that IKEA has made, IKEA delivers a signal to Chinese
customers that it wants to set a more cooperative relationship with them and it is
managing to achieve it.
4.3.2 Service management in IKEA China
IKEA sells its unique lifestyle as the core service to the customers while the premium
of modern home accessories as the peripheral service in its total package. What‘s
more the leisure, relax shopping context and Nordic romance bring numerous
customers into IKEA‘s stores.
The customers are those who have middle-income, and among which, young
generation accounts for a major proportion. However, the potential customer groups
such as university students and old people are not ignored by IKEA China. They are
always welcome to have fun and seek leisure in the shopping malls. In addition, since
IKEA can be taken as a children's play yard, parents and grandparents with small kids
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also go around IKEA much frequently. Even though they do not buy anything or shop
a little, they are still the major potential customers. Because next time when they want
to buy some home stuff or furniture, they might think about IKEA automatically, said
Ian Duff, the CEO in IKEA China (Wei, 2010).
The delivery system in IKEA covers the traditional customer self-service which means
customers still need to select and pick the products from the shelves and warehouse
themselves. Regarding home delivery, however, in order to better fit in Chinese
market and please the clients, the firm provides the delivery service with charging
fees for customers without cars, said Ms. Yin.
The image of IKEA has also been explored in two aspects. Internally, employees look
at their organizations as a family not a conventional company. IKEA also treats the
employees more like co-workers of mutually supporting. They are not restricted in
IKEA but have certain freedom to express their thought as long as it is better for
IKEA‘s development. As for the outsider, customers consider IKEA as a global
network of home fashion and the place where they can spend the leisure time.
Comparing with other furniture retailer stores, IKEA has strong global reputation
which tends to be the major reason to attract new customers. Especially in China, it
was said the local customers were just ready to embrace the trendy and modern
western furniture style when IKEA entered into Chinese market (Malmefjäll, 2010).
IKEA China inherits the traditional culture as it was founded, which is influenced by
the mentality of the civilian. That is to serve people with well-designed, quality
products at a price they can afford. Ingvar Kamprad, the founder of IKEA formulated
it as ―create a better everyday life for many people by offering a wide range of
well-designed, functional home furnishing products at prices so low that as many
people as possible will be able to afford them‖. IKEA China made several adaptation
in Chinese market but still keeps the core concept, finding cheaper solutions of better
life for the majority of people.
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4.4 A new phenomenon
In May, 2010, Red Star Macalline and IKEA China have been observed to open their
stores side by side. IKEA was constructing its mart just beside Red Star Macalline‘s
white symbolic building (see Figure 16). This is not a coincidence that two giants
happened to open their stores together to compete. Media, Nandu Daily (2010)
implies the two companies tied up and opened their stores side by side intentionally.
It is observed as a strategy which can be traced back to 2007, when Red Star
Macalline planned to initiate the strategic relationship with IKEA (Alestron, 2007).
According to the SinoCast China Business Daily News, Mr. Che, the chairman of Red
Star Macalline mentioned that Red Star Macalline had made a strategic plan with
IKEA China on purchasing land and opening neighboring stores across the country. It
is also said that this plan will be implemented by building six new stores in five cities.
(SinoCast China Business Daily News, 2007)
―Red Star Macalline is competing with IKEA, however, we are cooperating and
complementing at the same time‖, Mr. Che said to Beijing Business Today (Wu,
2010). Red Star Macalline‘s core products are big furniture, while IKEA China is
popular with small home products. Moreover, as IKEA is a worldwide famous brand,
customers visit IKEA more frequently. It seems evidential that customer volume in
IKEA is much larger than Red Star Macalline. Under such strategic plan, more
customers will drop by Red Star Macalline when they visit IKEA(Wu, 2010).
Figure 16: IKEA’s mart is under construction near Red Star
Macalline in Pudong, Shanghai, 2010
Source:
http://home.soufun.com/news/2010-05-20/3358118.htm
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IKEA also has its own consideration to work with Red Star Macalline potentially. A
manager of IKEA China said to Nandu Daily that for IKEA‘s new marts, the
development operation would be self-purchased land and self-built marts. However, it
is not easy for foreign retailers to purchase land in China, the rather that IKEA needs
a large area for its mart. The strategic plan with Red Star Macalline will make it easier
for IKEA to purchase land. At the same time, IKEA could rely on Red Star
Macalline‘s channel system promoting in first-tier and second-tier cities (Nddaily,
2010).
The coopetitive relationship between IKEA in China and Red Star Macalline though
largely exposed by media, have not been confirmed by IKEA China. When asked
about whether Red Star Macalline and IKEA China cooperate with each other, Ms.
Yin did not reply us directly, she only mentioned, ―IKEA China and Red Star
Macalline are friendly neighbors in several cities. Red Star Macalline is a successful
company with many merits that IKEA China can learn from‖. Cici Feng‘s reply was
just a meaningful smile. Even though it has not been confirmed to be a real
cooperation between two firms, this definitely represents a new phenomenon in retail
industry.
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5 Analysis
5.1 Premises of coopetition
Coopetition exists in both horizontal and vertical relationships in line with the value
net created by Brandenburger and Nalefuff (1995). Red Star Macalline‘s tenants are
involved in competitors and substitutors relationships which are considered as
horizontal coopetition. While in relation to IKEA China, a vertical coopetition is
observed, as customers play a more important role in the network. The vertically
linked actors are usually emphasized on cooperation, while the horizontally linked
actors are to rival (Steinby, 2002). Therefore, the premises are discussed in horizontal
and
vertical
perspectives
which
are
also
closely
associated
with
cooperation-dominated and competition-dominated coopetition.
5.1.1 Competition-dominated coopetition
Economic theory identifies two types of relationship between different products:
substitutes and complements (Grant, 2010). To large extent, products in Red Star
Macalline are constituted by these two types. The product portfolio includes sofa,
mattress, and traditional furniture all in all ten big categories (Red Star Macalline,
2012). In each product item, there are many brands for customer in different taste and
demand. In terms of individual product item, the goods for example, sofa, are in a
large similarity in respect to exterior, function. The major differences among various
brands can be categorized through the style, price range and customer group.
Regarding the strategy or business orientation, Red Star Macalline attempts to cover
customer as many as possible no matter in ages, salary and purpose, said Mr. Li.
Therefore, their products can really satisfy different types of customers‘ demand.
Complementary
Complements have been added as sixth force to Porter‘s framework of five forces
given its importance (Grant, 2010). Regarding the complements of product in Red
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Star Macalline, it tends to be a broader concept since it goes beyond the traditional
understanding of complements, like printer and ink. In this case, for instance,
construction materials to furniture, the high-end imported brands to local
manufacturing, can also be categorized as complements. Complements do increase
values for products in which they bring more value to customers.
Furthermore, in early established stores, the product portfolio is constrained to
conventional furniture. But now they have already managed 10 big columns. The
stores from generation to generation, not only has been changed to more outstanding
exterior, but also the largely improved shopping environment and service standard.
In shopping malls in cities like Beijing, Red Star Macalline imports the high-class
furniture from Italy and Spain as alternative options to national products. They intend
to make the product portfolio more comprehensive and diversified. According to their
analysis, customers in such metropolitans present the demand for high-class product,
mostly, globally renowned brands. Senior manager in Red Star Macalline, Mr. Shen
comments they were the first company which considers attracting this group of people
and gaining their consumption loyalty (Sina, 2006). Together with the majority
middle-class products, thus, customers in different income range can choose the
goods both preferable and affordable.
Similarity
The feature of complementary and similarity build the foundation of complements
and substitutes, which consequently leads to the cooperation and competition
concerning the relationship. Substitutes in Red Star Macalline‘s product portfolio
posit significant component. For instance, there are nine brands in bedding series,
including MPE, Enlanda, Auping, Matterring, Plaza, Stylution and so on (Red Star
Macalline, 2012). From the perspective of function, the firms are all manufacturing
and selling same product. These mattresses from different brands can substitute each
other if abolishing the issue of price and specification. The more substitutes exist, the
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easier for customers to switch to other brands in response to the price increases (Grant,
2010). Hence, the situation for competition cannot be denied in any circumstances.
The products, in same function but different brands and style, are competing for the
customer‘s attention. They are rivals in this sense. However, they are under the
overall administration and control of Red Star Macalline, explicitly in united pricing
and delivery system. When it comes to specific events, Red Star Macalline launches
activities like discount and exhibition, with the support and attendance of the vendor
companies. It does not mean to force each vendor take part in, Cici Feng mentioned.
However, most of the time, these activities are viewed as obtaining the mutual benefit
for both Red Star Macalline and vendor companies so that companies seem more
volunteered to join. From this point of view, Red Star Macalline and vendor firms are
working on a cooperative base. Therefore, the coopetition has emerged with the
co-existence of substitutes and complements.
In respect to this horizontal coopetition, complements and substitutes are equally key
factors, contradictive but unitive, leading the coopetition to a dynamically stable
situation. Among the coopetition dominant relations, the trade-off between
complementarity and similarity represent and highlight premises of coopetition in
which competitive nature of similar product in various brands and the cooperative
form under the administration of Red Star Macalline apply in this case.
5.1.2 Cooperation-dominated coopetition
Opposing to the horizontal coopetition, seller and buyer represent a cooperation
dominant relation which draws remarkable distinction from the previous one. The
vertical coopetitive relationship can be demonstrated by IKEA and its customers.
Recalling the hypothesis of theory, it is assumed that premises of cooperation
dominant coopetition tend to be the imbalance of bargaining power and the firm‘s
unique characteristics.
Bargaining power
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IKEA as a seller compete with customers for bargaining power to affect the pricing,
marketing activity and delivery service. For example, in early years when IKEA
entered in Chinese market, the price for most Chinese people was rather expensive.
During the ‗competition‘, for attracting people IKEA decided to cut down the price by
50% to meet the customer‘s willingness of affordable price. Though lowering the
price significantly at that time, IKEA still manages to gain high margin profit with the
help of global sourcing and purchasing to decrease operating cost. Simultaneously, it
builds the extraordinary reputation among Chinese consumer, good price, good
quality, and good design. Based on this viewpoint, customers present a stronger
bargaining power that affects IKEA‘s action in business.
Unique characteristics
IKEA has formed a unique characteristic in furniture retailing in China. The
competitive advantage of IKEA, low cost and global reputation can easily attract and
retain the customers. More important, the key factor of IKEA‘s charm is the unique
lifestyle that attract customer to go there even without buying anything. Shopping
furniture and home product often has been considered as an exhausting action.
However, in IKEA, people take it as a leisure time activity, feeling joy and peace. The
shopping atmosphere has impacted on customers quite much and established the
unique lifestyle and romance for customers.
However, in response to low-cost tenet of IKEA, customers have to adapt the
self-service, in terms of self-packing and self-delivering. In this sense, IKEA does
cooperate with customers in attempt to fulfill the business operating. Customer‘s
value co-creation can be largely manifested in IKEA‘s case. Therefore, the
competition for bargaining power and cooperation with customers to fulfill the service
tend to be simultaneously required in this situation. Those are premises of
cooperation-dominated coopetition. Through the interactions between firms and
customers, the firm‘s competitiveness in terms of customer attraction has been
enhanced.
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5.2 Coopetition in two companies
Data in chapter 4 shows two types of coopetitive behaviors, competitive-dominated
behaviors in Red Star Macalline, and cooperative-dominated behaviors in IKEA
China. In this section, we try to find out whether and how mutual dependence and
power imbalance affect these coopetitive behaviors. It also provides an approach to
understand that to what extent coopetitors should compete, and to what extent they
should cooperate.
5.2.1 Competition dominant coopetitive relationships
in Red Star Macalline
As we mentioned in Chapter 2, a more complex relationship exists between different
brands and Red Star Macalline. It is termed as a landlord-tenants relationship which
plays an important role in Red Star Macalline‘s business model. Figure 17 shows the
complicated relationship.
Landlord
A
B
C
Tenants
*
Figure 17: Landlord - tenants coopetitive relationships
Source: Authors’ own creation
Red Star Macalline builds shopping malls on its self-owned land and rents stores out
to its selected tenants, who are famous for their domestic or foreign brands. Red Star
Macalline, as the owner of the mall, manages administrative task in the daily business
and provides the premises for the tenants. All the tenants are involved in an
intra-organizational coopetition, in which the cooperative side of the coopetition is
passively led by the landlord, Red Star Macalline.
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Mutual dependence
We analyze mutual dependence on two levels, first, the mutual dependence among
different brands. Second, we regard all the brands as a single group, and analyze its
mutual dependence with Red Star Macalline. A low-mutual-dependence can be seen
in the first situation, as different brands do not depend on one another for critical
resources. They are separated furnishing companies focusing on their own products
and target markets. For example, there are many imported foreign brands in Red Star
Macalline which target on the higher-class consumers. The price is much higher than
domestic brands, however, the quality and brand image is also higher, said Yaojun
Shen, the top manager of Beijing and Tianjing division to Sina Media (Sina, 2006).
In the second situation, the mutual dependence between Red Star Macalline and its
tenants is also low. On the one hand, the primary resources that tenants rely on Red
Star Macalline are its united facilities and its reputation in China. They do not need to
stick to Red Star Macalline, but have the rights to choose other furnishing retailers or
open their own speciality stores to sell their products. On the other hand, as Red Star
Macalline is well-known, it has many alternative brands to choose to cooperate.
Power imbalance
Regarding power imbalance, Red Star Macalline as the landlord and the shopping
mall‘s manager has more power than its tenants. Firstly, Red Star Macalline has the
rights to choose its tenants. When asking about the criteria, Cici Feng said that only
the well-known brands have the chance to cooperate with Red Star Macalline, ―The
furnishing manufactures know if they are qualified to settle in our shopping malls.
They also know their positions when they come in. It has become a self-evident
discipline‖. However, the criteria are flexible depending on locations, as customers
have different tastes in different areas. ―We regard the brands which cater for local
customers as the popular brands, though they are probably not welcome in other
areas.‖ Said Xingyong Ren, the top manager of Chengdu Red Star Macalline (Chen,
2009) Secondly, Red Star Macalline organizes the administrative tasks and sales
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promotion activities. All the tenants need to follow the regulations in the shopping
mall and pay administrative fees on time.
Though Red Star Macalline is the power-advantaged party compared with its tenants,
it does not control the bottle-necked resources. A low mutual dependence means that
both Red Star Macalline and furnishing companies have other accesses to needed
resources, they do not need to involve in much cooperation to survive. Moreover a
failed agreement between them is of less concern to both parties. For example, a
furnishing company could try to cooperate with another retailer if Red Star Macalline
refuses its entry.
In this condition, a competition dominant coopetitive relationship is prominent in the
network. On the competitive side, tenants are responsible for their own profit and loss.
They try to differentiate their products from their competitors in style or quality and
ask for a premium price from customers. As now they cluster to operate in the same
shopping mall, the competition becomes more severed. What they are really
competing is the image delivered to customers, especially in the showrooms, which
display different kinds of lifestyle by showing different brands‘ combination.
On the cooperative side, all the brands must cooperate in some way, though not
deeply cooperate. For example, the tenants need to obey the rules setting by Red Star
Macalline. They share the same facilities and janitors, and attract customers to the
same place. Red Star Macalline does not conduct the competition among tenants
directly, but it manages the cooperation and tries to develop a healthy competitive
environment for its tenants. ―Red Star Macalline offers unified marketing, after-sale
service and staff training program for tenants and it treats every tenant equally
without discrimination.‖ Cici Feng explained.
Therefore, in their coopetitive relationships, competitive side overweight cooperative
side, and hence competitive behaviors are more visible in coopetition. This proves our
previous hypothesis: in the low-mutual-dependence condition, actors behave
competitively regardless their power imbalance.
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5.2.2 Cooperation dominant coopetitive relationships
in IKEA China
Different from Red Star Macalline, IKEA China, like most of its stores in the world,
sells its self-brand products. Thus, there is no such horizontal relationship which is
identified within Red Star Macalline. However, for IKEA China, dealing with a
vertical coopetitive relationship with Chinese customers is more vital for its business.
Mutual dependence
Concerning mutual dependence, Chinese customers‘ dependence on IKEA China is
less visible than the other way round. IKEA‘s Scandinavian-design furniture and its
―family‖ concept does attract many Chinese people to visit. However, Chinese
customers have many alternatives to choose from. With the same amount of money,
customers could find other satisfied substitutes. In addition, IKEA was an outcomer
when it came to China in 1998. IKEA is a brand of typical furnishing convenient store
in European countries; however, it was misunderstood as a noble brand by Chinese
customers. It is because of the relatively low socio-economic level in China and the
different consumption habit from Europe. Furniture is regard as durable commodity
which can be used for a long term in China. Chinese consumers are willing to pay
higher price for special design. But if too many people purchase the same thing, it is
no more special. That‘s why Chinese people do not want to pay a high price for
IKEA‘s simple furniture.
As for IKEA China, its aim of developing in Chinese market determines that it must
depend on Chinese consumers. In the first ten years since IKEA came to China, IKEA
had only eight stores opened in China, as it was not totally accepted by Chinese
customers. For example the self-service concept of the customers driving their new
furniture home and then assembling them by themselves, does not make sense to the
Chinese (Millier, 2004). IKEA realized that it has to make some changes such as
continually lowering prices and offering home delivery service to cater for customers.
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Power imbalance
The power between IKEA China and Chinese customers is also unequal. We may
regard Chinese customers as a powerful organization, which is informal but much
bigger than IKEA China. Chinese customers‘ potential purchasing power is promised
as China‘s economy is developing at a fast speed. Data from the World Bank
illustrates that the average income of Chinese was on the upper middle level in 2010
(Worldbank, 2010). To some extent, IKEA‘s development in China largely depends
on Chinese purchase. It needs to better fulfill Chinese customers demand to compete
with many other local and foreign furnishing retailers.
Above all, IKEA China is both dependence-disadvantaged and power-disadvantaged.
A failure of satisfying Chinese consumers would cost much for it. For that reason,
IKEA China is more active in developing a cooperative relationship with Chinese
customers. As a foreign company, IKEA adapts its price and business concept to
Chinese context to attract Chinese customers. According to Porter‘s Five Forces of
competition framework, one of the competitive pressures is from buyers bargain
power (Grant, 2010). The strength of buying power that IKEA China face from its
customers is largely depends on customers‘ price sensitivity, because in China, there
are a lot of cheap alternatives for almost everything. Ulf Smedberg said that when
IKEA first entered China, the price was considered too high for its target
consumers—young people—and the company had to lower its prices (Miller, 2004).
Pirated IKEA products have also forced the company to cut prices. Nowadays, the
prices in IKEA‘s Chinese stores have been slashed across the board by over 50
percent.
Though the development of IKEA in China is fairly slow, it has become more and
more popular among Chinese people. A survey from China Market Research Group
shows that the average number of shoppers a day who visit IKEA's
463,000-square-foot store in Beijing is 20,000. On weekends the number can spike to
around 30,000 (Fortune, 2011). IKEA's Scandinavian-design furniture and in-store
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cafeterias serving meatballs are big draws for up-and-coming Chinese (Figure 18
shows an IKEA‘s cafeteria in Shanghai). Most people who come to IKEA only want
to enjoy the cozy environment. They prefer to relax in Western-style showrooms or
stay in the cafeterias with friends. However, managers in IKEA China stores do not
mind. Ian Duffy, the company's Asia-Pacific president explained that the idea is that
―maybe if you've been visiting IKEA, eating meatballs, hot dogs, or ice cream for 10
years, then maybe you will consider IKEA when you get yourself a sofa.‖ (Wei, 2010)
IKEA has built a friendly relationship with its Chinese customers.
Figure 18: People relax in IKEA’s cafeteria in Shanghai
Source: China Media News December 2, 2011
In this case we observe a cooperative element dominates the coopetitive relationships,
and hence cooperative behaviors are more visible in coopetition. This proves another
hypothesis: In the imbalanced dependence situation, the actor who has both power
disadvantage and dependence disadvantage has more cooperative behaviors.
To make it more clearly, we draw the relation in the following models (figure 19):
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Mutual
dependence (low)
+
Power Imbalance
Dependence
disadvantage
+
Power
disadvantage
Master Thesis
Limin Chen & Shuai Hao
Comptitive
dominant
coopetitive
relationships
Competitive
dominant
behaviors
Cooperative
dominant
coopetitive
relationships
Cooperatitive
dominant
behaviors
Figure 19: Driving forces behind coopetitive behaviors
Source: Authors’ own creation
5.3 Coopetition adds values for service management
In line with aforementioned, there are rarely the cases that manifest the connection
between coopetition and service management. They mostly appear in technological
firms where rivalry firms align to each other to work on a specific solution. Regarding
this discussion context, the furniture retailing represents one of the most conventional
industries. The entire industry got several problems to move on. Now it has been
experiencing the shift from a traditional retailing business to a more service-oriented
industry. Thus service management plays such a vital role for organizing the routine.
One of the merits derived from coopetition is value creation, also viewed as a key
advantage. Some classical alliances in automobile sector, such as Honda-Isuzu,
Opel-Renault and Volkswagen-Porsche (Dagnino and Padula, 2002) have provided
great representation for value creation among firms.
5.3.1 Service
management
system
in
Red
Star
Macalline
In line with the service management system in Norman (2002), the system design fit
in Red Star Macalline can be illustrated as the following chart (figure 20). The core
service in Red Star Macalline is diversified and clustering products in high quality
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and slightly high price to attract the customers in middle and high salary. In their
stores, Red Star Macalline provides the delivery service for free; meanwhile,
customers also can do it by themselves. During the shopping time, sales lady always
come to the customer actively and provide consultancy. Red Star Macalline‘s
employees see the company as a learning organization. From the customers‘ point of
view, Red Star Macalline stands for the high-end shopping mall which sells the
trendiest product.
Service management system in Red Star Macalline
Customers in
middle and
high salary
Diversified and
clustering
products
To love your
home
Firm offering
Customer &
self-service
Learning;
outstanding
shopping mall
own created application
Figure 20: Service management system in Red Star Macalline
Source: Adapted from Norman (2002)
Coopetitive force makes the product portfolio more comprehensive. In order to
maintain the product diversity, the company would continue to bring in more brands
and other categories of home accessories. Bundling brands offer the opportunities for
customer to select and match the products they prefer. Thanks to the multitude
diversity, people are exposed to all products and they can stick to one store and finish
everything about decorating a house, so-called one-stop shopping. Customers can
save their time and leverage their resources with proper options.
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Many exhibition rooms in different style in Red Star Macalline are open to customers
which aim to provide the basic stream of decorating design. Those showrooms are
constituted by furniture from different brands rather than being as a pure
advertisement for a single brand. The competitive brands collaborate with each other
and offer the inspiration for customers to think about what they really want for their
homes. In Red Star Macalline, there are several decorating styles, such as the
Southeast style, the European style and the countryside style. To the clients who have
no preferred style can easily choose one of those for their homes and pick the current
furniture at stores.
The bundling coopetitive brands extend the core competence of Red Star Macalline,
from selling single furniture to a more diversified combination and trendy concept, in
turn, contributing to customer‘s choice and satisfaction. It also leads to the expanded
customer group to which the competitive brands can target in different range of
income, with most of them clustering in middle-to-high level. Through the pressure
from close rivals, vendors in Red Star Macalline pay sufficient effort on building their
individual competencies and competitiveness incorporating the administration of
landlord. Furthermore, the entire corporate culture has been moving toward more
diversified, trendy and modern. Particularly, Red Star Macalline has announced a
home-love day on Dec, 3rd each year, aiming to call for the awareness and love of
individual home on which customers can enjoy a discount of shopping and fairly
prepared gift.
It is assumed that coopetition is able to enhance the service quality among coopetitive
entities. With the constant competition and umbrella-level cooperation, the
environment in stores become increasingly improved and turn out to be a more
service center gathering shopping, leisure and entertainment. Customers enjoy taking
a walk in Red Star Macalline, not only looking for the home decorating products, but
also getting more inspiration on fashionable home design and staying a place for
leisure activities. From the business concept, Red Star Macalline emphasizes a new
era, home economy, which stands out of the traditional furniture retailing.
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Reflecting on the hypothesis of the connection of coopetition and service management,
in the case of Red Star Macalline, it could be summarized that the actors involved in
competition dominant coopetition enhances the service quality in terms of product
diversity and customers‘ satisfaction.
5.3.2 Service management in IKEA China
Turning our focus to IKEA, the service management system in IKEA China exhibits
great distinction compared with the counterpart of Red Star Macalline (see figure 21).
The core product in IKEA China is the lifestyle implanted in huge amount of products
which stand at the premium of modern home accessories with a good integration of
cost efficiency and functional fancy. In IKEA stores, self-service is prevalent protocol
which means customers have to reach products and deliver them home by themselves.
Additionally, the payment can be done with the cashiers due to the abundant cheap
labor in China, instead of machine in most western nations. Customers who are in
favor of IKEA tend to be the young generation. Their salaries are normally in the
middle range so that they can afford the lower price products sold in IKEA in
comparison with Red Star Macalline. Most frequently, they go to IKEA to get some
inspiration of decorating their houses and the fashion on home accessories.
Employees in IKEA view their company as a family, mainly because the flat
hierarchical structure and peaceful atmosphere rooted from the Nordic European
tradition. The external image appears among consumers can be characterized by
global, fashionable and a fancy place for leisure.
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Service management system in IKEA China
Customers’
income in
middle range,
young
generation
Lifestyle,
romance;
premium of
modern home
accessories
Cheaper
choice for a
better life
self-service,
charged
delivery and
assembling
service
Family;
global, leisure,
fashion
Figure 21: Service management system in IKEA China
Source: Adapted from Norman (2002)
The coopetitive relationship between IKEA and customers put up a close connection
with the representation of the service management system. Coopetition is able to
enhance the customer value co-creation in order to achieve better performance of
service provider, IKEA in this case.
As
confirmed
in
previous
section,
the
coopetition
type
in
IKEA
is
cooperation-dominated and vertical where the direct components in this network are
suppliers and customers (particularly in this case). Cooperation-dominated coopetition
affects IKEA-customer relationship in many aspects. Due to the additional
requirement of delivery system, IKEA launches its home delivery to Chinese
customers. It can be observed that IKEA has put intensive effort to adapt into Chinese
culture and better meeting customer‘s satisfaction. Besides, customers give the
feedback and approve the leisure ―mark‖ of IKEA stores. For instance, when the
potential clients see other people visiting the store and spending their leisure time,
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they might go to IKEA stores next time and become the new customers. Customers
create value for IKEA and themselves simultaneously as the value co-creator.
The cooperation-dominated coopetition is more crucial in the function of enhancing
service management. IKEA in its early time in China is just considered as a common
furniture retailer which highlights the shopping environment and cares about
customers‘ feeling during the shopping time. However customers who experience the
unique shopping atmosphere and value leisure-spending environment truly contribute
to broaden its reputation. Via word of mouth, more and more customers fall in love
with this relaxed shopping in IKEA. Consequently, customers co-create IKEA‘s
culture-civilian choice for a better life. It is not only a store where people could buy
cheap and functional as well as good looking products, but also a place where people
could have a rest and spend an afternoon with friends after shopping. Furthermore, the
self-service and service-payment, as the cooperative activity of coopetition, also
represent the important components of value co-creation. Thus the cooperation
derived from coopetition enables the customers co-creating values.
Therefore, we conclude that cooperation-dominated coopetition can contribute to
service management, particularly, customer value co-creation which mirrors the
fourth hypothesis.
So far we have analyzed the promises of two types of coopetition in Red Star
Macalline and IKEA China respectively, and the driving forces behind them. We also
claim that coopetition contributes to service management system with respect to
service quality and value co-creation. To make our analysis clearer, we list them in
the following table (see table 4).
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Red Star Macalline
IKEA China
Competition type
Competition dominant
Cooperation dominant
Premises
Co-existence of complementaryand Bargaining power,
similarity
unique character
Resource
Low-mutual-dependence,
dependence
imbalance
power
Dependence
disadvantage,
power
disadvantage
Contribution
to
service management
Product diversity, enhanced service Facilitate customer value
quality
co-creation
Table 4: Comparison between Red Star Macalline and IKEA China
Source: Authors’ own creation
5.4 Discussion on coopetition possibility
Recently, Red Star Macalline and IKEA China have planned to open their stores side
by side in five cities. The benefits of neighboring stores are various, including the cost
efficiency, attracting more customers and potential landmark of local area. First of all,
through building their stores together, these two companies can share the parking area
and warehouse and have the joint management. Consequently, they can reduce the
expense of constructing and maintenance. Secondly, customers do not hesitate which
store to choose because they can definitely visit both of them. Thus, Red Star
Macalline and IKEA China enlarge their own client groups.
We wonder if one day they would really cooperate with each other. Is it possible for
them to compete and cooperate at the same time? It is interesting to discuss about this
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issue, since we see potential promises and a probable benefit regarding service
management for both of them.
Possibility of coopetition
Both Red Star Macalline and IKEA China are aiming at providing solutions for
customers to live a better life. In this sense, they have a common goal which is the
precondition for two companies to cooperate (Morris et al., 2007). The coopetition
will be conducted in a horizontal relationship, where similarity and complementation
present another premises. Since most Chinese customers prefer the small home
accessories in IKEA China and big furniture in Red Star Macalline, the two
companies show large proportion of complementation and could become the potential
complementors. Moreover, since both of them have quite comprehensive product
portfolio, Red Star Macalline and IKEA China can still remain competitors in
traditional segments. Therefore, the coopetition strategy between them has the
possibility to be adopted.
Future advantages
Taking the competitive advantage into account, coopetition is a strategy for
companies to gain more market shares (Abdallah and Wadhwa, 2009). IKEA stores
are concentrating in the first tiers cities in China. However, Red Star Macalline has
penetrated into 80 cities, both first and second-tier cities. IKEA can really take the
advantage of the channels and national network to enter into more markets. For Red
Star Macalline, it gets the closest access to IKEA and can learn from its experience of
global business operating which would help it expanding its business globally in the
future.
Furthermore, both Red Star Macalline and IKEA China could strengthen their brand
image and provide their customer better service by coopetition (Walley, 2007). When
two giants cooperate, several industrial and market information could be shared.
Probably some managerial experience could also be communicated and learned. With
the better knowledge of customers and management, they could sense and seize more
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opportunities to serve customers (Teece, 2007). It is not only a win-win game for Red
Star Macalline and IKEA, but also a benefit for all the customers.
Mirroring on the issue that Red Star Macalline and IKEA tie up together to build the
neighbor stores, it might be possible to implement the coopetition strategy between
the two firms. On the one hand, they are keeping traditional competitive relationship
in order to maintain and improve individual business. On the other hand, they have a
large change of complement each other as the base of the cooperation. Thus they can
create a new shopping concept as an integrated service provider, as well as develop a
new era for not only furniture retailer but players in other sectors.
Challenges
The concept of coopetition underlies a paradox situation as it brings together both
common and conflicting interests under one arrangement. A primary concern of two
parties in a coopetitive relationship, for example, tends to be the secrecy. When two
firms start to collaborate with each other, certain information exchange and mutual
access to potentially sensitive data take place. Thus it presents a risk of exposure of
business intelligence of both companies (Zineldin, 2004). Red Star Macalline and
IKEA China still have large proportion of products in direct competition. For instance,
the more access to each other, more information of product cost and pricing are
visible. If both of them design the same type of product in similar price, the
competition will be even fiercer. Under this circumstance, cooperative firms have to
walk a clear-cutting line and negotiate about competing activities and goals. From the
other perspective, mutual trust, tolerance and openness are required if they proceed
the cooperative agreement in attempt to reach the desired outcome (Zineldin, 2004).
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6 Conclusion and Discussion
6.1 Conclusion
In this study we aimed to make a deep research on coopetition strategy to address
some issues not mentioned in the current literatures. We put our main focus on a
single firm level, exploring the premises of coopetition strategy, the driving forces
behind coopetition behaviors, as well as the contribution of coopetition to service
management regarding each firm. We conducted our research in two popular
furnishing retailers in China, Red Star Macalline and IKEA China, which reflects two
types of coopetition, namely competition-dominated and cooperation-dominated
coopetition. Through our comparative case study, we eventually made certain
theoretical contributions to deep knowledge on coopetition in respect to single
firm perspective.
First, the premises of competition-dominated and cooperation-dominated coopetition
are different, as these two types of coopetition are usually connected to a horizontal or
a vertical coopetitive relationship. When applying coopetition strategy in firms which
involved in competition dominant coopetition, the co-existence of similarity and
complementary is the primary premise, while in cooperate dominant coopetition,
bargaining power of specific participants and unique characteristics of firms are more
important premises. As discussed in Red Star Macalline, coopetition lies in the
diversified similar products under one category and the complementing product
portfolio. Whereas in IKEA China, the bargaining power of customers and the
heterogeneous characteristics of the firm present the key premises.
Second, actors involved in a horizontal or a vertical coopetitive relationship also
behavior differently. Among others, the two main elements of resource dependence
play crucial roles as driving forces. Mutual dependence is the first definitive element
since it determines the stability of a relationship. Imbalanced mutual dependence
further determines which actors have more bargaining power when setting an
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agreement. Power imbalance exists under different levels of mutual dependence. It
offers as another factor that affects bargaining power besides mutual dependence. Our
study shows that in the low-mutual-dependence situation, actors have competitive
behaviors regardless of their power imbalance. Because power advantage does not
make so much sense if the reliability among actors is fairly low. However, in the
imbalanced mutual dependence situation, the actor who has both power disadvantage
and dependence disadvantage have more cooperative behaviors, as it largely rely on
its partner. The conclusion explains why different degrees of competitive and
cooperative tension exist in a coopetitive relationship. It also sheds light on a tricky
question, that is, to what extent firms need to compete, and to what extent they need
to cooperate.
Third, we make a bridge between coopetition strategy and service management. The
two companies we selected are running their business in service industry since the
service dominant view and service management philosophy have been gaining
increasingly attention among industry sectors. As the finding, competition dominant
coopetition facilitates the improvement of service quality in terms of product diversity
which was tested through the case of Red Star Macalline. Whereas in IKEA,
cooperation dominant coopetition identified in vertical relationship enhances the
customer value co-creation.
In our research, the service industry was the study context. The study result aims not
only applicable in these two firms, but also could be replicated into other firms in
service industry and become an emerging important branch of service management.
6.2 Limitation and future research
6.2.1 Limitation
The entire dissertation is theoretical-dominated approach with the peripheral support
of empirical case study. The main weakness, as stated in methodology section, tends
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to be less primary data from the case companies. The prime data sources are the
observations, previous interviews and published information. Unfortunately we did
not have the face-to-face interview session. However, during the data collection stage,
we tried to contact both the firms by emails and phone calls and luckily gathered
certain proportion of the empirical information that we needed. Furthermore, as
IKEA China and Red Star Macalline are running their business in China, while we
wrote our thesis in Sweden, the limited time and financial resources cause obstacles to
personal observations.
Another limitation lies in the deficient theoretical framework of coopetition which we
can base our research on. As it is a newly developed concept, there are less
predominant framework and general typology in the previous research. Thus the
coopetition-related knowledge we investigate are self-organized but not systematic.
Besides, we mainly focus on individual company rather the network with more than
two companies. It can be seen as a niche without sufficient previous theoretical effort.
Lacking of sufficient data blocks us to make deeper analysis on companies‘
managerial practice. It is a pity that we only compare some certain items of Red Star
Macalline and IKEA China, but did not provide empirical implications on how to
manage the coopetition strategy, nor did we find out how companies deal with the
paradoxical coopetitive relationships.
6.2.2 Future research
Bengtsson and Kock (2000) mentioned in their study, ―both qualitative and
quantitative studies are needed to penetrate this area of research deeper‖ (p. 424).
Researches among those previous studies as well as ours are mainly qualitative-based.
We hope later researches could fill in this gap.
Secondly, we investigate the coopetitive characteristics in individual firm which has a
complex structure like Red Star Macalline. It would be interesting to further explore
how the organizational structure affects coopetitive attribute and coopetitive
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behaviors. Our research brought close connection between horizontal coopetition and
its competitive side while vertical coopetition and its cooperative side, which tend to
be easily visualized. However, more profound and systematic classification and
typology of coopetition still requires ongoing investigation.
More specifically, we discussed the possibility of coopetition between Red Star
Macalline and IKEA China. The two firms have been observed to build neighboring
stores together. There are comments and news from media which stresses on the
cooperation truth between them. Resultantly, it can be viewed as the coopetition
strategy (simultaneously compete and cooperate). However, during our interview,
they rejected this news. No matter it actually takes place or not, from the theoretical
point of view, it is worthy to investigate the potential, and both pros and cons of
applying coopetition strategy. With more detailed information from both firms, the
future research on this theme is possible to be conducted.
In addition, in our research, the industry background is furniture retailing, which
belongs to the service industry. We highlight the contribution of coopetition to service
management. However, while analyzing the explicit service management, we
primarily adopt the service management system of Norman (2002) as the main
column to compare the two firms. In future, we do hope researchers could explore this
area through other analytical approach and construct the bridge between coopetition
and service industry investigation.
Overall, coopetition as a newly developed concept which have to be paid more
attention since it plays increasingly vital role in industry network. The traditional
single scope of competition or cooperation is less able to demonstrate the more
complex industry context. Furthermore, as mentioned above, we did not provide
practical suggestions on how to manage coopetition strategy, due to limited data.
Besides, managerial practice differs from different industry and period. Therefore we
encourage the later researches with both theoretical and empirical focus to enrich this
topic and make solid implications for companies.
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Reference
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Appendix
Interview questions for Red Star Macalline
1. Comparing with other competitors in furniture industry, what are the more
competitive products and services for Red Star Macalline?
2. What are the value-added services offered by Red Star Macalline?
3. Who are the main customers of Red Star Macalline in terms of age, income and
consumption objectives?
4. Which kind of corporate image and culture does Red Star Macalline intend to
deliver to customers?
5. What are the criteria for selecting vendors, e.g. classification, price and brand
reputation?
6. Please list a few famous brands in the furnishing, constructing materials and
furniture in Red Star Macalline‘s stores.
7. What measures does Red Star Macalline take in order to manage fair competition
among vendors?
8. Is it compulsive for vendors to join the sales promotion activities?
9. After joining in Red Star Macalline, can the vendor firms also join in other
furniture retailer independently?
10. Is there any cooperation among those vendor firms under the united
administration of Red Star Macalline?
11. Red Star Macalline adopts the business model as brand bundling. What are your
comments and understanding about this situation where vendors simultaneously
compete and cooperate with each other?
12. What does the business model in terms of brands bundling bring to the core
competence of Red Star Macalline?
13. We have observed that Red Star Macalline stores and IKEA stores are neighbors
in a few cities like Shenyang. Does Red Star Macalline cooperate with IKEA
China? Will Red Star Macalline cooperate with IKEA in other aspect nationally or
internationally?
95
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Limin Chen & Shuai Hao
Interview questions for IKEA China
1. Comparing with other competitors in furniture industry, what are the more
competitive products and services of IKEA China?
2. What are the value-added services offered by IKEA China?
3. Who are the main customers of IKEA China in terms of age, income and
consumption objectives?
4. Which kind of corporate image and culture does IKEA China intend to deliver
to customers?
5. What are the challenges did IKEA met when it entered Chinese market?
6. What do you think of IKEA‘s self-service model in Chinese context?
7. What changes has IKEA China made to build trust with Chinese customers?
8. What efforts have IKEA China‘s PR teams made to promote IKEA in China?
9. Many Chinese come to IKEA‘s stores only to enjoy the environment. What do
you think of this phenomenon?
10. We have observed that IKEA has intently built its stores beside Red Star
Macalline stores in a few cities like Shenyang. Do you think it is a way that
IKEA China cooperates with Red Star Macalline?
96